Hello, and welcome to LiqTech International's Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Blum with Lytham Partners.

Thank you so much, MJ. Good morning, everyone, and thank you all for joining us on today's conference call to discuss LiqTech International's second quarter 2023 financial results for the period ending June 30, 2023. Joining us on today's call from the company are Fei Chen, company’s Chief Executive Officer; and Simon Stadil, Chief Financial Officer. Before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of the call. Before I 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 a 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 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. I'm excited to get the opportunity to speak with you all today. During the second quarter, we continued to successfully execute against our strategy to drive profitable growth, which results in a strong 25% sequential increases in revenue and a significant improvement in gross margins. This combination of top line growth and the gross margin improvement coupled with tight control of operating expenses resulted in improving our adjusted EBITDA loss to just $0.6 million compared to a loss of $3.54 million in the year ago quarter. Adjusted EBITDA loss is the best performance the company has achieved for years and demonstrates our very achievable pathway to consistent profitability in the near term. As I stated on the last few quarters closed, we have a tremendous opportunity ahead of us to leverage our highly unique technological advantage, brand competencies and substantiality value to build a growing and profitable business. We moved quickly forward following my appointment to define our cooperative vision and the commercial strategy with a clear focus on four key initiatives. As reminder, those four initiatives are a focus on recurring revenue solutions, the creation of new partnerships and distribution agreements to expand our commercial reach, enhancement of operational efficiencies, and the deployment of larger system sales. To account those goals, we brought key sales and operations personnel, which have made an immediate positive impact on the business. Further, I have leveraged many of my relationships and strategic approaches that was prone to be successful when I was at Topsoe and at Grundfos, two of the leading industry companies in the world with an emphasis on water treatment, chemicals, and clean energy technologies. Where the new team has only been together for three full quarters now, I'm extremely…

Ladies and gentlemen, it appears we have lost connection with our speakers. [Operator Instructions] Thank you for standing by. Let's pick up where we lost off.

Perfect. Thank you MJ. Good morning everyone Simon here and sorry for that. Now let me add some color on financial highlights for the second quarter. The reported revenue was $5 million, comparable to the second quarter of last year and up 25% compared to the $4 million reported in the most recent sequential first quarter. Broken down by vertical, sales were as follows: Systems sales and related services of $2.1 million, comparable to the second quarter of last year and up 44% compared to the $1.4 million reported in the first quarter. Ceramic repair and membrane sales of $1.8 million again, comparable to the same period last year and up 27% sequentially compared to the first quarter. And finally Plastics, revenue of $1.1 million compared to $1 million in Q2 last year and down 3% compared to the first quarter. Overall, the second quarter benefited from a diversified and improved revenue mix, better suited for the existing manufacturing setup, allowing for increased manufacturing throughput and overall efficiency gains. Furthermore, the quarter revenue was underpinned by increased aftermarket activities leveraging our installed base spare parts sales, general service and commissioning activity and contracted remediation work. In comparison, the revenue for the second quarter of last year was mainly driven by a few sizable projects including the delivery of a Liquid Filtration System for an oil and gas client in the Middle East as well as the final delivery of the legacy framework order for DPF transportation in Asia. So while the overall revenue was comparable to the second quarter of last year the composition of the revenue is much more diversified in nature this year reflecting our ambition to build a more robust and established business model. As Fei mentioned, we expect full year revenue growth of 20% to 30%,…

Thank you, Simon. Before we open up for your questions, let me quickly summarize. We have moved quickly to accelerate the commercial and business development processes here at the company which is showing tangible results. We are growing our more predictable recurring revenue opportunities, leveraging our differentiated technology. We're also focusing on opportunities where we can deploy larger systems. Based on our outlook, this should translate into 20% to 30% growth in revenue during fiscal year 2023. We have improved our pricing discipline through enhanced cost visibility and elevated market intelligence and have placed a focus on recurring revenue opportunities which are delivering increased gross profit. As I mentioned our outlook for the year is gross margin of 15% to 20% compared to 3.5% in fiscal 2023. We are managing efficiencies across the entire organization. In addition to the manufacturing efficiencies I mentioned year-to-date operating cost is down 36% and 18% excluding the restructuring costs. We are creating new distributor relationships to address certain end markets and have made investments to the internal team to ensure effective multi-strategy approach to commercialization. Our agreement with NESR, Silicon Filter, Wondux and others are expected to be drivers of future system sales growth. And as we keep reiterating everything we are doing is set against the backdrop of achieving profitability. The organizational transition we are undertaking has proceeded with the emphasis on utilizing our existing co-competencies within the company and calibrated with our renewed strategic focus and the market dynamics. As Simon and I both mentioned, we remain on track to deliver breakeven at a $7 million in revenue, a number we think is achievable in the near term. I am highly optimistic about the future. On a final note, we will be attending a series of conferences in New York during the week of September 11 including the Lake Street Conference we would love the opportunity to meet with you where we are there. Please work with Robert Blum to coordinate any potential meetings. With that operator, we would be happy to take any questions.

Thank you, Fei. We will now begin the question-answer session. [Operator Instructions] Today's first question comes from Rob Brown with Lake Street Capital Markets.Please go ahead

Hi, Fei, Simon. Wanted to follow-up on your second half kind of growth confidence and outlook just want to get a sense of the visibility there and sort of what you're seeing in terms of demand and what gives you sort of the visibility into the second half growth?

That's a very good question. I would like to say in this way, what we have been working very hard this year also things that come to the position. It's really to get very reliable sales pipeline and increase the visibility of revenue per cap. So, when we say we're going to have the growth revenue trend is 30%, we have very strong visibility behind.

Okay. Great. And then I know you've done a lot of work and made a lot of progress on getting the distribution footprint expanded and in place. How much further do you need to go there, or do you feel like you've got what you need sort of how is that where are you at in that kind of effort?

And we are going to continue -- I mean, first of all, we already have signed some distributor and partnership contracts we definitely would like to work on those agreements and partners to really maximize the benefit of that. So the first half year we have signed the 15 swimming pool system contracts. And all of those actually have done together with our distributors. So definitely, we want to further strengthen that. But we do have some markets. We still not really going to yet give you example at the US market for swimming pool systems. There we will work on looking for new distributors. So we are really both utilize all the agreements we have signed maximized the benefits of that then we will continue to find the new partnership and distributors.

Okay. Great. Then another system business the larger system business I guess the oil and gas market and the marine market how is that pipeline looking? And when do you see that -- how do you see that sort of playing out over the next 12 months?

We are very active in those markets with our distributors. And those other areas take little longer time to really sign the contract but we have some very, very interesting opportunities in our pipeline. So, we would like [Technical Difficulty]

Pardon me, it appears we have lost connection. Please stand by while we reestablish our speaker line. Pardon, me we have reestablished our speakers.

Hi, Fei.

Hi, Rob. We are having interrupted. I did not know that this year.

Okay. Yes. I think we were talking about the large system orders and you said you were very active in them and should see that pipeline start to convert. I guess, that's what I heard. Feel free to continue to add on it or I can ask another question.

Yes. Okay. Yes, that's what I tried to say. We do have some very attractive opportunities, and we hope in the next two quarters, we're able to tell you some more on that.

Okay. Great. Thank you. And then you talked a little bit about the opportunity in the China acid filtration market. I know you got -- I think you had an order there. How is -- how would you rate that progress so far? And maybe just characterize the potential of that market.

Mean the phosphoric acid market in China is so huge, because more than 60% of phosphoric acid market is in China. So we are very, very happy. We're able to move in that direction. And Silicon Filter has been very fast, have this pilot unit order with us already. And in this market is quite conservative. The first thing you need to go to the market definitely is to have the pilot up running. So that's why we are very, very happy we moved so fast we're able to have the pilot to China and up and running. So I hope in the next two quarters, I will able to tell you more about this pilot system in China. So, I think it's a very strong sign both our distributor are very active in the market really pushing ahead. And also we see a very, very big interest in the Chinese market on our technology.

Okay. Great. And I'll turn it over. Great progress and thank you.

Thank you.

[Operator Instructions] Seeing no further questions, I'd like to turn the call back over to management for closing remarks.

Thank you. I just want to thank all of you very much for being with us today. We look forward to communicating with you soon again. Thank you for your support.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.