LiqTech International Announces Third Quarter 2023 Financial Results

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Nov 09, 2023, 08:00 ET

BALLERUP, Denmark, Nov. 9, 2023 /PRNewswire/ -- LiqTech International, Inc. (NASDAQ: LIQT) ("LiqTech"), a clean technology company that manufactures and markets highly specialized filtration technologies, today announced its financial results for the third quarter of 2023 for the period ended September 30, 2023.

Q3 2023 Financial Highlights

Revenue of $5.1 million, a 53% increase from Q3 2022.
Gross profit margin of 19% compared to 3% in Q3 2022.
Operating expenses of $2.6 million, compared to $2.4 million in Q3 2022.
Net loss of $(1.4) million, an improvement from $(1.8) million in Q3 2022.
Strong ending cash balance of $11.8 million.

Recent Operational Highlights

Received orders for two marine scrubber water treatment systems through recently enhanced distribution relationship with Joyo in China.
Entered into an agreement for the distribution of LiqTech's Aqua Solution® swimming pool water filtration systems covering the Middle East.
Entered into an agreement for the distribution of LiqTech's Aqua Solution® swimming pool water filtration systems covering Australia and Pacific Islands.
Entered into an amendment to extend the maturity of our $6.0 million Senior Promissory note from June 2024 to January 2026.

Management Commentary

"Our enhanced commercial strategy continues to deliver positive results, driven primarily by our established businesses--including the provision of commercial pool systems, general aftermarket sales, and the sale of ceramic membranes and diesel particulate filters--resulting in a year-over-year revenue growth of 53%," commented Fei Chen, CEO of LiqTech. "We also continued to execute against our goals to improve our manufacturing and operational efficiencies, demonstrating an increase in gross profit margin from 3% in the prior-year period to 19% in the current period, coupled with a 4% sequential decline in our operating expenses. As revenue growth continues and we better absorb our fixed manufacturing overhead through increased throughput, we should see continued improvement in gross profit margins as evidenced during the third quarter. This strong trend provides us with a clear pathway to quarterly breakeven in line with previous guidance."

"Within the established segment of our business, we also saw the return of our first new marine scrubber system orders in more than 18 months as we deployed an upgraded, modular-designed system through our recently enhanced distribution relationship with Joyo in China. LiqTech has more than 160 installations in the marine scrubber market, which occurred primarily between 2018 and 2020. With a renewed focus on this market, coupled with capable distribution partners, I believe there is an opportunity to regain our position in this market in the future."

"As we look to the rest of the year and into 2024, we see a number of opportunities in our targeted business segment particularly within phosphoric acid, mono ethylene glycol (MEG), and produced water as a component of the oil and gas market, all of which we believe will be key contributors to future growth alongside our established business. Further, our new partnerships within the commercial swimming pool market are expected to accelerate our growth in this key market segment for us starting next year."

"I am pleased with the progress our new leadership team has made to transform LiqTech operationally and commercially to become a leading provider of advanced and sustainable filtration solutions, servicing our clients globally. Looking into the last quarter of 2023, we will carefully monitor the escalating conflict in the Middle East, more specifically Israel and Gaza, as we continue to have important O&G projects ongoing in the region that may be negatively impacted by the situation. Across the rest of our business, we will work diligently to close out 2023 on a strong note while positioning for growth and margin accretion in 2024," Chen concluded.

Q3 2023 Financial Results

Revenue for the quarter ended September 30, 2023, was $5.1 million, compared to the $3.3 million reported in the third quarter of 2022. The positive development in revenue reflects a continued strengthening of our established business lines with a significant increase in aftermarket sales, more specifically membrane housings and general spare part sales, but also increased deliveries for pool systems in Europe and Asia Pacific. Furthermore, the quarter benefitted from stable DPF activity, continued remediation work for marine systems, and progress on external R&D projects to further strengthen our technology base.

While delivering a strong quarter, we did see a decline in incoming orders for general component sales due to macro-economic uncertainty and the impact from the European holiday early in the summer.

Gross profit for the quarter ended September 30, 2023, was $0.9 million, reflecting a gross profit margin of 19%, compared to $0.1 million, or a gross profit margin of 3%, in the third quarter of 2022. The positive variance in gross profit is a result of increased volume, an improved revenue mix with elevated contribution of high-margin aftermarket activities, enhanced pricing discipline, and targeted cost reductions. During the quarter, we have onboarded new hires to ramp up our ceramics manufacturing throughput, improve kiln utilization, and compress delivery lead times. Profitability was also underpinned by new quality and production optimization efforts, seeking to standardize our system and service delivery platforms.

Total operating expenses for the quarter ended September 30, 2023 were $2.6 million, compared to $2.4 million in the third quarter of 2022, with the increase attributable to the onboarding of additional sales representatives, increased IT costs, and intensified marketing efforts partly offset by reduced general and administrative expenses following the CEO transition and key management changes recorded in the third quarter of 2022.

Other Income (Expense) for the quarter ended September 30, 2023 was $0.3 million compared to $0.5 million in the third quarter of 2022, with the change reflecting a reduced gain on currency transactions, partially offset by increased interest income due to a more favorable deposit interest rate

Net Loss for the quarter ended September 30, 2023 was $(1.4) million compared to $(1.8) million in the third quarter of 2022. The change was attributable to the increase in revenue and gross profit margin, partially offset by an increase in operating expenses and reduction of other income.

Cash on hand (including restricted cash) on September 30, 2023 was $11.8 million compared to $12.6 million on June 30, 2023.

2023 Full-Year Outlook

The Company expects 2023 full year revenue between $19 million and $21 million with a reported full year gross margin range of 15-20%.

Conference Call Details

Date and Time: Thursday, November 9, 2023, at 10:00 a.m. ET

Call-in Information: Interested parties can access the conference call by dialing (833) 535-2206 or (412) 902-6741.

Webcast: Interested parties can access the conference call via a live webcast, which is available in the Investor Relations section of the Company's website at https://www.liqtech.com/investor-relations/ or at https://app.webinar.net/zAd4Xa5XeNn.

Replay: A teleconference replay of the call will be available until November 16, 2023, at (877) 344-7529 or (412) 317-0088, confirmation # 8554685.

About LiqTech International Inc.

LiqTech International, Inc., a Nevada corporation, is a clean technology company that provides state-of-the-art ceramic silicon carbide filtration technologies for gas and liquid purification. LiqTech's silicon carbide membranes are designed to be used in the most challenging water purification applications, and its silicon carbide filters are used to control diesel exhaust soot emissions. Applying nanotechnology, LiqTech develops products using its proprietary silicon carbide technology, resulting in a wide range of component membranes, membrane systems, and filters for both microfiltration and ultrafiltration applications. By incorporating LiqTech's SiC liquid membrane technology with the Company´s extensive systems design experience and capabilities, LiqTech offers unique, turnkey solutions for the most difficult water purification applications.

For more information, please visit www.liqtech.com

Follow LiqTech on Linkedln: http://www.linkedin.com/company/liqtech-international

Follow LiqTech on Twitter: https://twitter.com/LiqTech

Forward–Looking Statement

This press release contains "forward-looking statements." Although the forward-looking statements in this release reflect the good faith 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 in these forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in the reports filed with the Securities and Exchange Commission, including the risk factors that attempt to advise interested parties of the risks that may affect our business, financial condition, results of operation, and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.

We assume no obligation to update any forward-looking statements to reflect any event or circumstance that may arise after the date of this release.

Company Contact: Simon Stadil, Chief Financial Officer, LiqTech International, Inc., Phone: +45 3140 9128, www.liqtech.com;

Investor Contact: Robert Blum, Lytham Partners, LLC, Phone: (602) 889-9700, [email protected], www.lythampartners.com

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

	As of		As of
	September 30,		December 31,
	2023		2022
	(Unaudited)
Assets

Current Assets:
Cash and restricted cash	$	11,832,959	$	16,597,371
Accounts receivable, net of allowance for doubtful accounts of $48,909 and $59,559 at September 30, 2023 and December 31, 2022, respectively		3,883,813		2,310,344
Inventories, net of allowance for excess and obsolete inventory of $898,944 and $663,227 at September 30, 2023 and December 31, 2022, respectively		4,556,000		4,062,001
Contract assets		2,587,397		2,253,295
Prepaid expenses and other current assets		1,311,140		1,720,902
Assets held for sale		394,623		723,872

Total Current Assets		24,565,932		27,667,785

Long-Term Assets:
Property and equipment, net of accumulated depreciation of $10,713,077 and $9,046,499 at September 30, 2023 and December 31, 2022, respectively		8,640,532		8,296,807
Operating lease right-of-use assets		2,827,101		3,271,997
Deposits and other assets		446,149		450,038
Intangible assets, net of accumulated amortization of $509,641 and $438,250 at September 30, 2023 and December 31, 2022, respectively		135,363		212,933
Goodwill		223,951		226,095

Total Long-Term Assets		12,273,096		12,457,870

Total Assets	$	36,839,028	$	40,125,655

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

	As of		As of
	September 30,		December 31,
	2023		2022
	(Unaudited)
Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable	$	2,233,853	$	1,389,355
Accrued expenses		3,847,849		3,087,206
Current portion of finance lease obligations		558,961		399,198
Current portion of operating lease liabilities		548,417		561,182
Contract liabilities		540,153		649,557

Total Current Liabilities		7,729,233		6,086,498


Deferred tax liability		111,077		154,645
Finance lease obligations, net of current portion		2,899,640		2,384,011
Operating lease liabilities, net of current portion		2,278,684		2,710,815
Senior promissory notes payable, net of debt discount of $1,455,127 and $519,686 at September 30, 2023 and December 31, 2022, respectively		4,544,873		5,480,314

Total Long-term Liabilities		9,834,274		10,729,785

Total Liabilities		17,563,507		16,816,283


Stockholders' Equity:
Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022		-		-
Common stock; par value $0.001, 12,500,000 shares authorized, 5,727,310 and 5,498,260 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		5,727		5,498
Additional paid-in capital		98,662,745		96,975,476
Accumulated deficit		(72,710,060)		(67,351,035)
Accumulated other comprehensive loss		(6,682,891)		(6,320,567)

Total Stockholders' Equity		19,275,521		23,309,372

Total Liabilities and Stockholders' Equity	$	36,839,028	$	40,125,655

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022

Revenue	$	5,070,446	$	3,305,534	$	14,071,984	$	11,961,062
Cost of Goods Sold		4,121,881		3,198,255		11,569,549		11,460,102

Gross Profit		948,565		107,279		2,502,435		500,960

Operating Expenses:
Selling expenses		965,039		676,420		3,175,699		2,932,881
General and administrative expenses		1,253,779		1,429,315		3,690,211		4,611,375
Research and development expenses		428,600		283,524		1,131,003		1,377,097
Restructuring costs		-		(1,964)		-		1,786,863

Total Operating Expense		2,647,418		2,387,295		7,996,913		10,708,216

Loss from Operations		(1,698,853)		(2,280,016)		(5,494,478)		(10,207,256)

Other Income (Expense)
Interest and other income		103,887		1,870		272,105		344,593
Interest expense		(34,734)		(28,514)		(92,633)		(394,532)
Amortization discount on Notes		(86,447)		(84,098)		(257,765)		(2,304,054)
Gain (Loss) on currency transactions		287,437		628,137		170,653		361,928
Gain on lease termination		-		(3,317)		-		150,258
Gain on sale of fixed assets		-		(19)		-		642

Total Other Income (Expense)		270,143		514,059		92,360		(1,841,165)

Loss Before Income Taxes		(1,428,710)		(1,765,957)		(5,402,118)		(12,048,421)

Income Tax Benefit		14,480		13,293		43,093		42,274

Net Loss	$	(1,414,230)	$	(1,752,664)	$	(5,359,025)	$	(12,006,147)


Basic and Diluted Loss Per Share	$	(0.25)	$	(0.32)	$	(0.94)	$	(2.95)

Basic and Diluted Weighted Average Common Shares Outstanding		5,705,729		5,486,475		5,684,430		4,066,144