LiqTech International Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 21, 2024

There are 7 speakers on the call.

Operator

4th Quarter and Fiscal Year 2023 Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this conference is being recorded. I would now like to hand the call to Robert Blum with Lytham Partners.

Operator

Please go ahead.

Speaker 1

All right. Thank you so much, MJ. Good morning, everyone, and thank you all for joining us today on the conference call to discuss LiqTech International's Q4 and fiscal year 2023 financial results for the period ending December 31, 2023. Joining us on today's call from the company is Fay Chen, Chief Executive Officer and Philip Price. For those not familiar, Philip has recently assumed the role as Interim Chief Financial Officer.

Speaker 1

Before I turn the call over to management, let me remind listeners that there will be an open Q and A session at the end of the call. MJ provided the instructions on how to queue up at the beginning there. Before we begin with prepared remarks, we submit for the record the following 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.

Speaker 1

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 1 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.

Speaker 1

Fei, please proceed.

Speaker 2

Thank you, Robert, and good day to everyone on the call. I am excited to have this opportunity to speak with you and share an update on the solid progress we have made during the last year. During 2023, we successfully executed a number of strategic initiatives to drive revenue growth, improve our manufacturing and operational efficiencies, and the strength of our balance sheet. We grew our revenue by 13% and increased our gross margin by 12 percentage points. Meanwhile, we reduced our operating expenses with RMB2.5 million and improved the bottom line with RMB5.6 million.

Speaker 2

After taking our as CEO in late 2022, I have introduced a new commercial strategy that has initially focused on stabilizing and growing our established business areas, which are core in terms of our ability to generate revenue. This effort includes reducing the length of the sales cycle we have in mass segments, such as our commercial pool systems. And it also means, new types of customers or customer needs in areas where we have an extensive customer base. This includes, for example, diesel particulate filters, marine scrubbers and other areas where we have recurring revenue opportunities, such as general aftermarket sales and the plastics. This established business market provides a strong and stable base of revenue for Diptech and allows us to gain manufacturing efficiencies by leveraging our existing production capacity.

Speaker 2

The 2023 financial results clearly show that our new strategic focus is working. I will dive into more details on how we intend to continue focusing and improving each of our established areas in a moment. Before doing so, however, let's talk about what we refer to as our target markets. Where we have stabilized the business and brought about operational efficiencies, we are also setting the stage for growth in key markets where our high performance silicone carbon ceramic membranes can provide customers with strong returns on their investments. This includes specific industry filtration applications to remove solids, oil, pathogens and heavy metals from water as well as compounds from emissions and industrial off gases.

Speaker 2

Where this has potential to encompass a large number of markets, we have narrowed our near term focus to chemical and the petrochemicals, such as phosphoric acid and the monoecin glycol and oil and gas produced water. These areas tend to have longer sales cycles, but it is our belief that if we align ourselves with great partners and establish key reference customers, the sales cycles will decrease and the large market opportunity will open up for this tick. As I hope you all have seen from the 2 most recent press releases we issued over the last 2 weeks, this process has already begun. Last week, we announced that we have received a significant order for a containerized pilot system for produced water treatment from ResoBank Direct. This marks our first ever U.

Speaker 2

S.-based oil and gas produced water order. The containerized pilot system that Resovac Direct has required will be used at the customer site to test, demonstrate and document the efficiency of D6 which arbitration technology in trading produced water to facilitate beneficial in the industrial reuse and meet current and the future regulatory requirements. And the longer term, the intention is to use the results from this pilot operation as the basis to design and implement full scale commercial systems for the onshore oil and gas application in the U. S. The North American oil and gas market is going to be a key focus for Dipteik moving forward led by our agreement with the ReshoVec Direct who has a strong presence in key oil and gas geographies in the U.

Speaker 2

S. The speed at which this order came is really exciting. As we entered into a distribution agreement with retroflex direct only a month ago. This is clearly a significant milestone in our efforts to expand operations in North America and we are really excited about the future perspectives and the potential it holds. We followed up the U.

Speaker 2

S. Order from Razorback Direct with another significant oil and gas produced water commercial pilot order from National Energy Service Reunited, or NASA, in the Middle East. This unit will be used in Gulf Cooperation Council Countries by 1 of the largest integrated energy and chemicals companies in the world. This order has been in the works for some time, but encountered some delays towards the end of last year due to the conflict in the Middle East. The delay accounted for the majority vast majority of the differences between our initially stated annual guidance and the results we concluded the year with.

Speaker 2

Where we are certainly frustrated by the delay, we couldn't be more pleased to have moved this program forward. Once again, we believe that this commercialized unit for produced water has the ability to open the doors for additional orders with this customer and many other operators in the region. It is important to note that the first oil and gas produced water unit that we deployed in the Middle East in mid-twenty 22 was a key reference point in receiving this order. That system has been now successfully operating for nearly 2 years and our 99% of the feed water passing through it is being delivered back as clean brine permit water for reinjection. Young produced water for the oil and gas industry, another significant opportunity for us lies within monoethylene glycol or MEZ.

Speaker 2

During 2023, we had our 1st offshore installation in the Mediterranean with a large oil and gas client, which continues to perform well. As I mentioned last quarter, this was the first of a 2 part order for the offshore project with expectations for follow on orders shown. This, however, had again encountered some delays due to the conflicts in the Middle East. As a reminder, the platform is located just off the coast of Israel. We initially expected the second order to ship in late 2023, but it will most likely be a 2024 event now.

Speaker 2

As I stated at the beginning, where these OEMs and gas orders can initially have a long sales cycles, it is our firm belief that getting our foot in the door to showcase the capabilities of our systems will allow us to shorten future sales cycle and ultimately help us open a very large attractive addressable market. Sensating away from oil and gas, let's move on to phosphorous acid, another key target market where we have recently reevaluated our position. In doing so, it has become evident that there is a broader opportunity for us in what I recall the broader chemical or petrochemical markets, where our solutions have a superior value proposition. In the past 15 years, we have sold membranes to 40 to 50 different customers for chemicals, petrochemicals applications. The customers are very satisfied with our membrane filtration efficiency and excellent lifetime.

Speaker 2

We will therefore work on establishing strong collaborations with selected system integration companies, OEM, to penetrate this highly relevant and potential marketplace. As you can hear, I am pleased with the progress we have made to advance our position within our target markets where our core technology can be easily adapted. Each of these areas provide us with a large addressable market and opportunity to unlock significant growth for LiqTech as we move forward. But as I have stated many times since I took over as CEO, I will not put all the company's eggs in one basket, chasing opportunities that have longer sales cycles. We need to have a strong base that provides us with revenue and the cash flows.

Speaker 2

That's where our established market strategy comes into play. So let me just touch on a couple of focus areas within our established markets, starting with our commercial swimming pool products. During 2023, we successfully delivered 20 swimming pool systems in total. We now have more than 120 commercial swimming pool installations across Europe and the Pacific Oceans regions. During 2023, we executed key distribution agreement with Oxidigm, WaterCo, BiondRe and the Total Pool to expand our footprint.

Speaker 2

As we look into 2024, we will work on harvesting the results from our established partnerships and build our reputation further in the market. We are looking to further expand into key geographics where we don't have a presence such as in Germany, France, Netherlands and United States. I am pleased with the progress we have achieved and look forward to continue Mark's adoption in the years to come. Transitioning to our DPS and the membrane businesses, Again, these are areas we're seeing our established markets where we have an extensive base of more than 50 long term DPF customers and another 40 to 50 customers on the membrane side. We offer a highly defined value proposition to our customers across both Europe, North America for DPFs and Europe and China for membranes.

Speaker 2

During 2023, our DPF and ceramic membrane business in combination generated RMB6.2 million in sales. As we pointed out in our press release, we are seeing order flow improving for DPFs with new orders up 11% sequentially compared to Q1 of 2023. As we enter 2024, we will remain focused on building up new DPF customers in emerging areas such as black carbon emission and emergency electricity generation. Nurturing our existing customer base, we are focusing on strategic customers with master agreements. On the membrane side, we are looking to scale up through OEM partners in China, Europe and U.

Speaker 2

S. We think there is a strong opportunity for this business to grow nicely in the years to come. Finally, let's discuss our initiatives on the marine scrubber side. As those of you that have followed the company's closely for many years know, this was a very large part of the business in 2018 2019, driven by the pending introduction of IMO 2020, which regulated emissions on marine vessels. Since 2018, we have approximately 170 installations around work with multiple types of ships.

Speaker 2

Unfortunately, the adoption of IMO 2020 was impacted by the epidemic. However, we saw the return of our first new marine scrubber system orders in more than 18 months as we deployed and upgraded modular design system through our recently enhanced distribution relationship with YouYou in China during the Q3 of 2023. Where we still are not seeing the same adoption rates we saw back in 2018 2019, there does still appear to be a market for our solutions. Furthermore, new types of marine fuels and engine technologies are currently being developed and we believe our systems may be suited to support them. Therefore, our team is working to re terminate the relationship we had in the past and develop new agreements that will potentially put us in a position to regain the leadership position we previously held in this market.

Speaker 2

Having completed my 1st full fiscal year as CEO of Lietech, I am proud of the accomplishments we have made. It is my firm belief that ZEETEC is more relevant today than ever before. Our filtration solutions address key issues related to climate change induced freshwater scarcity were also helped to reduce emissions, lower energy consumptions and increased productivities. Our silicon carbon membrane solutions remove particles, oil, pathogens and heavy metals from water, making it possible to recycle it for essential applications, thereby reducing stress on our freshwater resources. Our diesel particulate filters reduce harmful emissions from diesel vehicles, diesel machinery or power generators.

Speaker 2

We are also effectively removing black carbon emissions in maritime applications. And our commercial crude situation provides significant environmental benefits and the cost saving with up to 80% less water usage, 60% lower energy consumption and 30% less chloride dosing. Together with our partners, we create advanced filtration solutions for liquid and gas purification that provide clear value to our customers and the contributor to a cleaner and a more sustainable planet. We are executing against the business plan we have set first with the strong operational and financial progress made in 2023. As we look to 2024, we are confident in our ability to continue expanding our revenue base across both our established markets and the target markets.

Speaker 2

We're driving improvement in operational efficiency that will move the company to breakeven this year. Before I return it over to Philip to review the financial results, let me just take a moment to thank Simon Steli for his commitment to LiqTech for the past 2 years. Simon joined LiqTech at time of a tremendous transition for the company and provide a steady hand and software insight when it was needed most. As Robert stated at the beginning, Philip has assumed the role as Interim Chief Financial Officer. Many of you have had a chance to meet with Philip over the past few months and hopefully have come away impressed as I have with his understanding of Lietech and our opportunity.

Speaker 2

Philip has held the role of Head of Group Finance for Lietech for the last 2 years and I look forward to his continued contribution as he steps into the role of Interim Chief Financial Officer. With that said, let me turn the call over to Filip to review the financial results in more detail. Filip?

Speaker 3

Thank you, Faye, and good morning, everyone. Now let me add some color on the financial highlights for the full year of 2023. The reported revenue of $18,000,000 represents an increase of 13% or $2,000,000 compared to the $16,000,000 reported for the full year of 2022, which underlines a robust result in a transition year for LiqTech with a new leadership team and revised strategy. We are pleased with the progress on both top and bottom line. As Faye mentioned, we did experience delays in order delivery due to the escalating geopolitical unrest in Israel Gaza, which did postpone project deliveries and client commitments in our oil and gas projects in the region.

Speaker 3

Broken down by verticals, sales were as follows: system sales and related services of $7,700,000 an increase of more than 45% compared to the $5,300,000 reported in 2022 due to a significant increase in food system deliveries as well as the increased focus on our aftermarket activities. Looking at our ceramics business, DPF and membrane sales ended at $6,200,000 down 9% compared to $6,800,000 last year, reflecting a dedicated focus on improving profitability by carefully managing our revenue mix. And finally, Classics revenue and externally funded R and D projects of $4,100,000 up 6% compared to $3,800,000 reported in 2022, underpinned by stable Classics order intake as well as progress on key external R and D projects. In summary, our system sales and related services experienced a significant increase. The Plastics business continued its stable performance and the Ceramics business experienced a decline reflecting our focus on profitable deliveries.

Speaker 3

To be specific, the key revenue drivers during the year was a record high number of pool system deliveries shipped to clients across Europe and Asia Pacific, but also the delivery of our 1st phosphoric acid pilot to China, continued progress on key projects within oil and gas and metal cooling and finally increased aftermarket sales with uptick in orders for both marine and asset applications, leveraging our global installed base. Zooming in on our component business, our ceramics and plastic businesses executed on incoming orders with decisive focus on improving throughput and reducing lead times. In terms of our forward guidance, we expect the Q1 of 2024 to be comparable to the just ended quarter of 2023 with a top line growth of approximately 3% to 8% and a gross margin ranging between 5% to 10%. We remain committed to growing our business over the coming quarters as we work intensively to execute on our vision to further penetrate the global oil and gas, chemicals and pool system markets with our proven and industry leading solutions. Turning to our gross margin and more insight on our journey towards breakeven.

Speaker 3

We are pleased to report a full year gross profit of $2,800,000 indicating a gross profit margin of 15.4% compared to just 3.5% reported for the full year of 2022. The result is within our previously disclosed guidance. The positive development compared to 2022 is a direct result of increased activity levels and better revenue mix as we continue to streamline our business and zoom in on the markets where we can deliver profitable growth. From an operational perspective, during the year, we have installed new kilns and revitalized our ceramics facility with new organization further complementing the positive momentum. We continue to have excess capacity, hence the immediate focus to compress delivery lead times and ensure the delivery of high quality membranes and filters.

Speaker 3

Distribution margin. We remain focused on closely monitoring this important KPI to ensure we develop a profitable and sustainable business financial objectives of breakeven. For the full year of 2023, our contribution margin ended at 46% and thus well above the 30% reported for the full year of 2022. Our contribution margin has historically been volatile as it directly correlates with the underlying revenue mix. However, we have now succeeded in significantly improving and stabilizing our contribution margin well above 40%.

Speaker 3

On that note, we do maintain our quarterly breakeven target measured on an adjusted EBITDA basis of approximately $7,000,000 in revenue and potentially lower with the right revenue mix. Turning to OpEx. The full year OpEx of $10,600,000 came down 19% or $2,500,000 from the comparable full year of 2022. The result is evidence of our commitment on running a lean business by rightsizing and streamlining our operations. Our primary focus is to keep OpEx at a reasonable level to maintain our quarterly breakeven target.

Speaker 3

This ensures financial stability and support strategic investments for sustained profitability. Other expenses of $1,000,000 came down compared to the $1,900,000 reported last year with the development mainly explained by the increased levels in prior year due to the early repayment of the convertible note in 2022. Concluding on the P and L, we reported a net loss of $8,600,000 compared to the net loss of $14,200,000 reported in 2022. As evidenced, we still need to deliver profitable growth over the coming years to help safeguard our business and restore profitability. We are well positioned with excess production capacity and thus commercial order intake remains our number one priority.

Speaker 3

Finally, let me briefly comment on our cash flow and balance sheet before summarizing and handing back over to Fei. We ended the year with $10,400,000 in cash, down $6,200,000 compared to the year end 2022. We took delivery of multiple machines and manufacturing equipment during the year with net cash used in investment activities of $2,900,000 all related to commitments made in previous years in the context of our domestic and international expansions plans. The equipment has contributed to a solid upgrade to our manufacturing facilities and therefore we do not anticipate similar investments over the coming years as we are well positioned to grow within our existing capacity. Also, I'm pleased that during the year, we successfully extended our June 2024 maturity related to our senior promissory notes to January 2026.

Speaker 3

In summary, the underlying cash flow profile is improving as we are showing progress on both top line and profitability combined with a more stable capital structure. Thanks everyone for your support and back over to you, Ulfing.

Speaker 2

Thank you, Philip. In closing, we remain committed to executing against our strategic roadmap focused on long term value creation. Over the past year, we have launched a clearly defined commercial strategy that has already yielded positive results. Going forward, our business will be underpinned by strong recurring revenues within our established businesses and the increased foothold in our strategic target markets. This growth covered with improved operational execution across organization, will be key to drive safe change in gross margins and the positive cash flows.

Speaker 2

I look forward to continuing to execute against our strategic initiatives in 2024 to drive value creation for our shareholders. With that, operator, we would be happy to take any questions.

Operator

Thank you. We will now begin the question and answer session. Today's first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Speaker 4

Hi, Tay. Hi, Philip.

Speaker 2

Hi, Rob.

Speaker 5

First question is on the good progress in the oil and gas kind of area with the U. S. Partner. Just wanted to get a sense, I guess, in both the new partnerships, how is that play out? Is there a what is the test period?

Speaker 5

And how does the incremental order activity sort of play out? What is it dependent?

Speaker 2

Yes. As you have heard, we are very excited about this opportunity because we actually just signed the distribution agreement with this new partner 1 month ago. And we are so happy to see a thing more so fast. We already have the first pilot plan on the way to U. S.

Speaker 2

Actually already this week. So really we are working with this partner very close together. And our joint goal is to make this pilot plan up running as soon as possible on the ground in U. S. Because that will be a very good showcase to the other potential partners and customers and about our new technology for the produced water in U.

Speaker 2

S, a very interesting market for us.

Speaker 5

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

Speaker 2

Yes. I mean, the regulatory drive the situation is in U. S, especially in the areas like Texas, New Mexico and some other states is really the oil producing states. There's more and more water scarcity coming up. And there's really discussion going on about the, they call, beneficial reuse of the water, both for the industry and for agriculture and also for reinjection.

Speaker 2

And for all these applications and use, you do need to kind of treat the water before you're doing any other treatment. So our U. S. Membrane is the best for the pretreatment treatment for produced water in all other uses. You can either use for the reinjection or use it for the agricultural irrigation and also for the industry process in reuse.

Speaker 2

We can be the efficient for SIP. So that's why our application actually is really directly related to the upcoming regulatory requirements. And but even not only regulatory requirement, even the industry needs is really related to us because everyone is looking at how to reuse the

Speaker 5

water. Okay, great. Congratulations on that progress there. And then on sort of the ethylene glycol market, I think you had some delays there. How does that market sort of look at this point?

Speaker 5

Are you waiting really for that project to kind of kick in? Or are there other customers that system can be used on? And can you see growth in 2024 in that market?

Speaker 2

Yes. The NED market, as we announced, we was expecting the 2nd part of the order coming already last year. And it was delayed because we need some operation period in the offshore platform and that offshore platform is right at the coast of Israel. So it was really been delayed. And then everything was delayed quite longer than what expected in the beginning.

Speaker 2

And now things are starting going back to normal. So we do believe we will have something happen in 2,000 12. I'd say it's going to be even in 2024. And we also start working if there's other companies besides this company able to use this technology. So there's more potentials also there.

Speaker 2

But definitely for this concrete customers, we expect something to happen in 2024.

Speaker 6

Great. And then last question is

Speaker 5

on the DPS market. I think that was down a little bit as you focused on the margin there. How does that look in 2024? Should that grow in 2024? And I guess, what sort of the dynamics there that you see?

Speaker 2

Yes. The reason 2023 EPS market is going down is because we got a very huge order from one customer in Asia and that big order actually is not a very good margin for us. So we made adjustments. We do not want to sell any DPFs to this kind of project involved. We really want to improve our profitability.

Speaker 2

So we changed our photos. And that's why the revenue goes down, but the profitability has goes up quite a lot significantly. And very happy to tell you, Rob, this year, the Q1, the sales order for DPF actually increased 11% compared to the same quarter of 2023. So we definitely expect a very nice growth of DPF this year. And those for especially for some new emerging areas like black carbon emission and also the emergency electricity generator for the data centers around the world.

Speaker 2

And that was really increasing demanding. So we really believe it's going to going to be an increase, quite nice increase this year.

Speaker 4

Okay, great.

Speaker 6

Thank you.

Speaker 5

I'll turn it over.

Speaker 2

Thank you.

Operator

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

Speaker 6

Hi, Faye. Hi, Philip. Good afternoon. Rob, good morning. Congratulations.

Speaker 6

I'm actually in your time zone, the Danish time zone right now. And, yes, this is exciting. I have a few questions. First of all, like on your business development, like if you look at your overall order book, how does it look? Is it getting better?

Speaker 6

Is it worse than it was, let's say, 6 months ago?

Speaker 2

I mean, this is very, very relevant question. When I come in, in 2022 late 2022, I realized we have to build up sales pipeline because we do not have very nice sales pipeline at all. And that's what we have done in 2023, the whole year, to build up the new sales team and the sales pipeline. So I would say very confidently and the project we made working into 2024 is based on the pipelines and that's why it's much more improved than 2023.

Speaker 6

Okay. So it is getting better. Can you also help us understand that sales cycle? Again, it seems like a really important thing. Like you've talked about the need to shorten it.

Speaker 6

When you look at system sales as an example, what is the time between you would typically get an order and when you would actually book revenues?

Speaker 2

I mean, we have different segments, right? Each of the segments are different. And if I take the commercial pool system as example, what we really have been doing in 2023 is really reduce the cycle from when we got order to we deliver, so we can book the revenue. And we have standardized our design and really streamlined our production. So the delivery time has reduced from 24 weeks to 6 weeks.

Speaker 2

So that means when we get order today, maximum 6 weeks, we were able to convert that into revenue. And that's really a significant improvement compared with before.

Speaker 6

Okay. I guess in some of the target markets where you're still developing it that you can't just do that right off the bat, but the goal over time is to get

Speaker 2

that kind of efficiency. Is that fair? Exactly. What we are doing is we're actually trying to standardize all the solutions for our system and market. So in this way, we're able to really reduce the converting time and also reduce to increase the quality and the stability of our system.

Speaker 2

So this is what we are working on across all the product lines actually.

Speaker 6

Okay. Just shifting over to the regulatory environment, would you say that overall it's getting better for LiqTech or are we going backwards? For instance, we've seen sort of a backlash against ESG. I mean, what are you seeing when you go out and try and sell your systems in terms of the regulatory tailwind or headwind?

Speaker 2

I mean, if you're talking from the macroeconomic point of view, definitely, we are seeing the mega trends for the water scarcity and for the energy efficiency and also for the air pollution improvement. So we are really having some very good mega trends. It's on our back. So we really have some big potential. And one of the things we actually learned from our marine scrubber market is we have to be going out to work with customers.

Speaker 2

So have their needs, not only based on regulatory requirements alone, really based on their also their business needs. So that you can see that the markets we are working on today, they are majority of them, not only based on the regulatory requirements, it's also because the customer really has the needs. Of course, the DPF area is very much regulatory driven, but we have some very good trends there like a black carbon emission for maritime industry. It's really more and more enforcement there. And also the emergency generator for data center with all this artificial intelligence that are going in the world, more and more data center are required.

Speaker 2

And they have to have the DPF installed. So there are some really strong victory in these areas. And then the oil gas, as I discussed before, withdraw, it's not only on the regulatory requirement. It's also about the company really have extra needs. They would like to reuse the water.

Speaker 2

So that in that way, we are kind of more stable than only rely on the regulatory requirements.

Speaker 6

Got it. Got it. Okay. Just a financial question or 2. Do you have your revenue growth outlook at this point?

Speaker 3

So we only comment for the next quarter. And what we guide for is, if you can compare to the just ended quarter, we expect revenue growth of 3% to 8%.

Speaker 6

Okay. Is that so does that should we take from that that your visibility is not that you're confident about your visibility that we would just be looking to Q3?

Speaker 2

No, the reason we don't make them longer than that is, our mix product mix is quite complicated and some projects are very big, some projects more. And so the dynamics are changing very much. So that's why we do have the forecast for the whole year, but this dynamic changing makes it very difficult to say exactly when it's coming. So we feel it's more reliable to tell a quarter of time. In this way, we know exactly what's going to happen because the dynamic is very difficult to reflect if you're telling the whole thing.

Speaker 6

Okay. Okay. Last question and thanks for indulging me. What do you based on the mix that you're targeting, let's say, over the next year or 2, what is your breakeven accounting breakeven revenue run rate?

Speaker 3

So as we also mentioned before, we are still comfortable that our breakeven target revenue target is $7,000,000 It could be lower depending on the revenue mix, but that's what we're aiming at. $7,000,000 per quarter.

Speaker 2

So if we're able to achieve $7,000,000 a quarter, we will be able to reach breakeven.

Speaker 6

Okay, got it. Okay. Thank you so much for answering all my questions.

Speaker 2

Thank you very much.

Operator

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

Speaker 4

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

Speaker 2

We are going we're selling this kind of systems through the partners. So basically, we're saving directly to our partners. So they purchase the equipment from us, then they run at customer side. They're saving further to the customer side. So this is a very good model for us because we are small companies, do not have so much capital.

Speaker 2

So this is the way we're working on.

Speaker 4

Okay. And what is the capacity that you're expected to offer as far as like barrels per day for the process you'll be involved in?

Speaker 2

I mean those small pilot units, we can trade the water between 3,000 to 5,000 barrels per day. But our concept design, we're able to scale up to like 100,000 barrel per day. It's okay for I mean, we have the modern design concept, we're able to scale up. So that's why we are very excited to have those pilot projects going on, especially when in U. S, because very interesting market for us.

Speaker 2

U. S. Is our strategic focus market and we hope this pilot unit up running fast and we're able to gather data and also the suitcase, then we're able to scale up the full scale commercial system in U. S.

Speaker 4

Okay. And so 100,000 barrels per day, what would your process cost a service provider to buy that system that is capable of 100,000 barrels a day?

Speaker 2

I cannot answer that question here now because it's very much depends on what kind of water quality you have because we need to adjust what kind of elements in our system and so on. So it's very much a site specific. And also there's a lot of conditions under the facility and so on and so we'll be connect to that. So it's really something we discuss every time when the customer and the partner come with the request and we will discuss with them. And the more interesting thing is more discussing about the cost to treat for berry or water because that's what industry using to compare to each other.

Speaker 2

And we are confident our treatment costs will be comparable with other competitive technology. This is one of the things we measure out on.

Speaker 4

And so what is that value? Is that $1 $2 $3 per barrel?

Speaker 2

And it's a range. I think it's between $0.50 to $0.50, 1 dollars something like that.

Speaker 4

Right. But as you said earlier, you're only doing a small portion of the cleanup of the produced water, correct? You're a pretreatment. Is that before or after they kind of clean some of the chemicals first to treat the water?

Speaker 2

Depends on the application. Are you

Speaker 4

involved in like desal at the end or are you involved in taking the chemicals out in the beginning?

Speaker 2

We only doing the pretreatment. So basically, if you're using the water for reinjection, then our technology is efficient enough. You don't need any other additional technology. I mean, you'll need the water for agriculture irrigation, then you might need desalination and that's not something we are working. We are only working on our technology.

Speaker 6

Okay.

Speaker 4

All right. That's helpful. The release was a little untraditional. You didn't break out the 4th quarter on its own. I guess the formal release will be have more detail of the specific quarter.

Speaker 4

Is that correct?

Speaker 2

Sorry, I almost cannot hear what you said.

Speaker 4

You reported full year. You didn't break out the quarter. That's a little untraditional. I guess your filings with the government will have more detail.

Speaker 2

We are also told last year and now we gave a guidance for each quarter at time.

Speaker 4

Thank you very much.

Speaker 2

Thank you.

Operator

Thank you. This concludes our question and answer session. I would now like to turn the call back over to management for closing remarks.

Speaker 2

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

Operator

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

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Earnings Conference Call
LiqTech International Q4 2023
00:00 / 00:00