All right. Thank you very much, Jason, and good morning, everyone. Thank you all for joining us today for the LiqTech International First Quarter 2024 Financial Results Conference Call for the period ending March 31, 2024. Joining us on today's call from the company are Fei Chen, Chief Executive Officer; and Phillip Price, the company's Interim Chief Financial Officer. Before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of today's call. If you dialed in through the traditional teleconference line, you can press star then one to ask a question. If you are listening through the webcast portal and would like to ask a question, you can submit your question through the ask a question feature in the webcast player. We'll do our best to get to as many questions as possible. 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 the 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. That said, 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 am excited to have this opportunity to speak with you and hear an update on the solid progress we have made as we maintain our focus on delivering against the strategic plan we instituted over the past year to successfully stabilize and grow our business initially through our established markets and then position ourselves for incremental growth through our target markets. As a quick reminder, our established markets are marks where we have extensive customer bases and typically have reduced sales cycle times. This includes commercial pool systems, diesel particulate fitters, marine scrubbers and other areas where we have recurring revenue opportunities such as [Technical Difficulty] plastics. This established business markets provides a strong and stable base of revenue for LiqTech and allow us to gain manufacturing efficiencies by leveraging our existing production capacity. Our target markets include key markets where our high-performance silicon carbon ceramic membrane can provide customers with a strong return on their investments. This includes specific industry filtration applications to remove solid oil pathogens and heavy metals from water as well as compounds from emissions and industrial off-gases. These areas tend to have longer sales cycles, but it's 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 LiqTech. I am pleased to report that strategy is working. As I assume most of you saw, we are expecting a significant step-up sequentially in revenue for the second quarter, with revenue to be between $5 million and $5.5 million. This would represent an approximate 20% to 30% sequential revenue growth. But before we talk about a few of the forward-looking expectations and the drivers to the…

Thank you, Fei, and good morning, everyone. Now let's dive into the financial highlights for the quarter. Revenue came in at $4.2 million compared to $4.0 million in the same quarter last year, representing an increase of 6%. This performance falls within our previously disclosed guidance. Broken down by verticals, sales were as follows: Systems sales and related services of $1.5 million compared to $1.4 million in the same period last year and $1.6 million in Q4. DPF and ceramic membrane sales of $1.8 million compared to $1.4 million in the same period last year and up sequentially compared to the $1.4 million in Q4. And finally, Plastics revenues of $0.9 million compared to $1.2 million in Q1 last year and $0.8 million in Q4. In summary, our Ceramics business experienced a significant increase, the system sales and related services recorded a slight uptick and the Plastics underwent a notable decline. To be specific, the key revenue drivers for this quarter was the delivery of our first U.S.-based oil and gas produced water order as part of our new distribution agreement with Razorback Direct, along with increased sales of DPF and ceramic membrane sales attributed to focused sales efforts beginning from May 2023 that generated elevated activity in the current year. The decline in Plastics revenue relates solely to a large one-off sale that was recorded in 2023 without recurrence in the current year. In terms of our forward guidance, as Fei mentioned, we expect the revenue for the second quarter of 2024 to be between $5 million and $5.5 million, which would be a significant increase of approximately 20% to 30% compared to the just ended quarter. We remain committed to growing our business over the coming quarter as we work intensively to execute on our ambition to further…

Thank you, Phillip. In closing, we remain committed to executing against our strategic road map, focused on long-term value creation. Over the past years, we have launched a clearly defined commercial strategy that has already yielded positive results. Going forward, our business will be underpinned by strong continuing revenues within our established businesses and increased foothold in our strategic target markets. The growth we expect in quarter 2 and the results of the year covered with improved operational execution across organization will be key to drive safe change in gross margins and positive cash flows. I look forward to continuing to execute against our strategic initiatives in 2024 to drive value creation for our shareholders. One final comment before I turn it over to your questions. I will be participating together with Phillip in the Lytham Partners Spring 2024 Investor Conference on May 30. If you would like to schedule a one-on-one meeting, please contact Robert Blum and he will be happy to coordinate for you. With that, operator, we would be happy to take any questions.

[Operator Instructions] Our first question comes from Rob Brown from Lake Street Capital Markets.

Congratulations on all the progress.

Thank you, Rob.

I guess, first question is on the U.S. oil and gas market. Great to see some progress there in getting delivery. Could you give us a sense of how the pilot program plays out? I think you talked about a relatively short assessment period and then maybe a sense of how the market development and pipeline development happens after that.

And as I mentioned in the talk, the pilot has arrived in the U.S. and on the 30th of April. And actually, now it's already at the customer side. We are very happy to start running already this week and the coming week. So we expect in the coming months or so, we're going to have the first testing results. So that will really give the clear indication about the performance of our pilot plan for the U.S. produced water. And we are already discussing with different companies and especially also with the Razorback Direct about a pipeline. So there's a lot of things going on, and it's like really people are exciting to see the results of this pilot testing. So we are very exciting to see the progress in the next couple of years -- months.

Okay. Great. And I assume, given the Middle East system running for a couple of years that the progress will be favorable. Just want to get a sense, what's the -- what's sort of the system benefits that the customer gets with your system? And maybe just what's the sales pitch that Razorback goes out with to its customer base?

Thanks a lot, Rob. This is a very, very good question. The really good benefits of our system definitely is our membrane is really suitable for this type of the water treatment. It's a highly oil content, and there's also metal content and also very high solid content. And we have demonstrated both in the Middle East and also actually through our marine scrubber market, and our membrane is really good for this type of treatment. And it really can be cleaned up very efficiently to keep the efficiency of filtration. And this is exactly the difference between our membrane and the polymer membrane. So we really have the long lifetime and the very high efficiency is through a long period of time. And the second thing is we have a containerized solution. So it's really -- it's very easy to use. It's mobilized, you can put down the track, can transport from one side to the other side. And also, it's a modelized build. So basically, we only need demand at customer side, some basic utilities in place, then we can just put the container there and the plugging and really able to start treat. So you don't need all those construction -- civil construction work. And also the footprint is very small. We have a very compact design of our system. And this really convenient to use and operating cost is much lower than the other existing technology in the market. So those are the things we also really we're able to demonstrate through our pilot testing, both the quality of our filtration and also the OpEx data and also hold operation benefits. Those things, we're able to make our pitch much more sharp when we finished our pilot testing in a couple of months.

Okay. Great. And then on the Q2 ramp in revenue, I think you mentioned pool systems really stepping up. Could the pool market, does that become more of a diversified stream of activity there going forward? Or is there some kind of onetime stocking stuff going down, but just a sense of how the pool market is developing and how you see it playing out over the next 18 months or so?

We are -- right now, we primarily active in Europe and Australia, and we are now moving into U.S. market. So we would like to go to U.S., market to [Technical Difficulty] really funny. We're not really active today, and that's also something we're going to come in. So the next 6 months, we are entering the new territories for our pool system.

Okay. Great. And then in terms of the partnerships, you continue to add some nice partnerships. How much more is to go in getting the partnerships in place? Or do you feel like this -- that you've announced to kind of fill out where you were working on?

I mean, we have just announced the 2 partnerships [Technical Difficulty] And as you see, we will continue to find the partners and maybe different type of partner. But for marine, for example, we have the Dan Marine is really for the sales and distribution and the Franman is different because they have really network with the ship owner. So what we're trying to do is we try to get the partners through a whole stakeholder group. So in this way, our sales and max penetration will be much more efficient. So this is our sauce because we're already building quite some partnerships, and we want to be more clever really to use the partnership in a more multiple dimensions to really move our sales more efficient ahead in the selected verticals, which we are working.

[Operator Instructions] Our next question comes from Lucas Ward from Ascendiant Capital Markets.

Lucas Ward here. Fei and Phillip, congratulations on your business progress. So I wanted to look at the overall revenue opportunity and just sort of understand like what are the keys to really scaling it up? Because it looks like you have so many opportunities in different geographies and different verticals and you have the filter opportunities and the system opportunities. And it's almost like you're planting seeds in a lot of different places. And so I guess I wanted to ask from your perspective, what are the keys to really scaling those, growing them?

I mean, that was a very good observation. We are playing the seeds because what we have found out is our strategic focus area that means swimming pool system, DPF and marine and oil and gas. If we just look at the membrane, if we look at all this together, we actually have addressed the market potential of USD 4 billion. So today, we have marked here less than 1%. So we are actually in the process really clear out the way and putting the seeds for the next week growth. So what you can see is the DPF actually, we are doing very good now in Europe. And we would like to see in next year or coming years where is the new playground, but we would like still really grow in Europe first of all. And the pool system, we are growing very well now in the U.K. and in Australia and in Spain, and we would like to also go to the other markets. So you'll see now it's really we're putting on the foundation, but really can grow fast in the future. And we feel really can see the last years as we've done in the different segment, and it's the right way to go. So we are continuing to putting the seeds on the ground, and then we will harvest them in the coming period. But it's really a very exciting period ahead first.

And Lucas, also, just to add some color, it's also just not to be reliable on only one business area. So to spread our risk.

Got it. Okay. Can you comment more on competition? Like how much of a factor, because the way you presented it, it sounds like it's just -- it's mostly a sales and marketing challenge. It's a matter of like finding the right partners and the resources and just going after it. But could you also comment on who you see in various verticals and geographies? Are they the same players over and over again? And how much does competition impact your ability to get those design wins?

The interesting about our market is that we don't have a uniform competitor across all the segments to actually have a different competition in a different segment, and they all different from each to other. And if we take a DPF at [ December ] before, we actually had a competitor in Denmark, but that company has been bought by a [ Tennis ] company. So the whole production has been moved to China. So that actually give us a competitive advantage because we are the European company and many of the European customers like to buy from a European company. So that's very interesting. And we do have some competition in Germany and in Japan and the French. But we are the ones in the niche is we are very flexible and able to deliver fast and with a high-end product. And that was our special in this DPF area. And many of our customers are recurring customers. So this is a very solid customer base, and they are still growing. It's given us a very good basis for the revenue income. And if we take the swimming pool area, our competition technology is a sand filter. And our filtration technology solution for the pool system is much more environmental friendly and energy saving and the water saving and the chemical reduction. So we have some really unique value propositions for this market. So it's really, for me, it's really only the marketing and the sales speed from our side. It's going to push ahead. And the oil and gas areas, we are still new. We're trying to get in. But we definitely see there's need for our solutions in that sector. We don't see any heads on competition yet, and we are keeping very much alert to see what is coming when we have opened the door and really able to demonstrate our technology. And marine area, we did have very strong competition. As I mentioned in the last couple of calls, and we had very good initiative [ marks ]. We go into a very dominant position and there's many Chinese cheap solutions come in with a very bad performance, and they cannot flash the market. So right now, we are trying to go back in the [ market ] with much more clear view and go to the high end and like this exhausted gas recirculation. That's a market, those cheap technology cannot really stand and we're trying to go back there and really occupy market because that was perfect for our solution. So we come back with some more smart solution at different angles. So this you can hear different segments, there are different competition. We don't have one word competition across the all segment.

Okay. One more question on operating expenses. It was surprisingly low. It hasn't been this low for a long time, and it was attributed to this release of bonus provisions. I just wanted to understand like what that means and what I should expect going forward in terms of modeling operating expenses.

Yes, of course. So the release of bonus provisions relates to the 2023 KPIs. So we didn't meet the target and therefore, we released the bonus provisions, hence, the positive effect on the OpEx. But the level that you should expect is around $2.6 million for the quarter.

Okay. That's all I had.

Okay. We are very much cost conscious. So we're really trying to increase our output from production and output from the salespeople. So we're really trying to become more and more efficient. And in this way, we actually can keep the operating cost down and increase the sales and our revenue at the same time. So this is one of very clear KPI for us, and we're also trying to improve our process across the whole value chain.

Okay. Yes. It didn't -- it seemed like there was more going on there, like more of a sort of a structural shift towards cost savings. So thanks for confirming that.

[Operator Instructions] And our next question comes from George Melas from MKH Management.

Good job on the quarter and the progress. I had a question about the U.S. oil and gas order. I'm trying to understand how it happened so fast. Was it that basically Razorback sort of had a customer and that had a problem and they went looking for technology and found you and signed that distribution agreement and then they were able to propose a solution to their customer? Or did they sign a relationship with you first and then started looking for customers and one happened to happen so fast?

I think that's a very interesting question. I have to say in this way, we are very happy. We find this very good partner to work with because they are in the oil and the gas market and very much alert what is customer needs. So they have a very strong customer network and the customer group already. So they know exactly what the customer is really looking for and really lack of the technology. And we have found out the chemistry of these 2 companies match very well, and there are some very clever technical people and the commercial people in Razorback Direct. So since we start discussion -- simultaneously, we already started discussing present our technology to them. And also they tell us what the customer needs. So it's not like we sign the contract, then we start work together. We already start work, at the same time we sign the contract, and that's also a process. We find out this is the partner we would like to work together with. So that's why there's more than any one 1 month we find the customer. And -- but I have to say it's a really, really good at them. They have a customer really had a really need for a new solution for their problem. So this is a very good match.

Okay. Great. Okay. And then how many different other solutions can they propose to their customers in terms of treating the produced water because, clearly, they have some solutions right now, but you are a new technology that they offer. So how -- what are the alternatives that they have provided in the past?

I mean, this is a general knowledge in the market for all the people in the oil and gas market. The pretreatment for produced water is rather tough because the water is nasty. You have a lot of oil inside and a lot of metal content and also salt and solid, many solid particles. So traditionally, there are many different kind of chemical treatment method for this part. And I think most of people, they don't like use chemical mixture today. So when they see our solutions, some needs and also automation and really kind of user friendly also both for the operator and for the environment. So they really got excited about this and it is potential right away because they are kind of tired of the chemical process -- chemical treatment. So this is -- you can be lucky sometimes. I think we are lucky because they are looking for something better than what they have today.

Okay. Okay. Great. And then one final question on the pool systems. Given the existing distributors that you have, so assuming you're not adding any distributors, but I think you will. But with the existing distributors, do you expect to have to beat the 2023 deliveries? You had 20 deliveries in '23 with the existing distributors, can you match that or beat that? In terms of what visibility do you have in the pool system?

We are definitely trying to work with our existing distributors, make them much more efficient. So I expect their sales grow because, I mean, if they grow their sales and we can grow our revenue. And at the same time, we're also going to build new distributors in the next half year. So it's a combination of both, but I definitely expect our distributors every year, their sales should grow.

Okay. And then what kind of visibility do you have into the pipeline there -- their pipeline?

Sorry?

What visibility do you have into their pipeline?

We have total new transparency. So we really work closely together. So they're really our partners.

Fei and Phillip, I've got just a couple of questions here through the webcast portal that I want to make sure we get addressed. So I'll try to move through a few of these quickly and summarize where there's some overlap. First one is, can you talk about sort of your general sales approach in the United States. It seems like that's a focus area for you. Is this going to be sort of a team approach, marketing, distributors. Just expand a little bit more on your focus in the U.S.

We have the first distribution partner for the oil and gas area, Razorback Direct. And what we're working with them is really very close to together. We do the testing together, and we do the marketing together, and we're doing the sales pipeline together and the sales work also together. And their people will do the ground service, and we will be the back office and also the technical support for them. So there will be our arm and the legs in the U.S. ground. So this is for the oil and gas. And definitely, we will continue to grow this relationship. And for the pool system, we expect also to find some partners in the U.S. market to help us do the marketing and the sales and also potentially in the future, also the service. So it's really a strong partnership we are working in the U.S., trying to really make the sales penetration in this market. U.S. is a very big market. So definitely, we will not only have one partner, and we need more partners. But we would like to take one at a time and really make that happen, then we see what that brings next.

All right. Fantastic. A couple of questions here. Just sort of talking about sort of your breakeven, which I know you talked on a little bit, but maybe just to expand a little bit on sort of the outlook here, your breakeven rate sort of goals in terms of achieving positive cash flow, et cetera.

Yes. So as we mentioned before, we still maintain the guidance for when the business will be breakeven and that's with a quarterly revenue of approximately $7 million, potentially lower if we have the right revenue mix. Regarding to the cash flow that's, of course, a key KPI for us, we are determined to preserve the cash in order to maintain our strategic and financial flexibility. We also acknowledge that we need to increase the throughput of our existing facilities in order to accelerate growth and reduce lead times and ultimately pave the way to a business in balance from both a net income and cash flow perspective. And also what Fei mentioned before is that our main focus is on running a lean business.

All right. Fantastic. It looks like I've got one last question here. You've talked about some of the growth, I guess, within the DPF solutions referenced Europe inland transportation and electricity emergency generators. Maybe just expand on what some of the drivers are for that? Is it sort of a sales approach? Or is this sort of a market-driven approach? Just expand a little bit more on the DPF growth there.

And I would say it's a very, very strong trend. We have fear now in the market. And the European inland transportation, it got more and more public and politic awareness. So people really start looking in these sectors and start talking about how much emission they actually give to people through this inland transportation. So countries like Holland and Germany definitely are looking at that now, and that's what we feel. And we do get some very good customers and the stronger ones, they actually go into this area and really have a very close collaboration with us in that. And we expect to see this growing in the coming years, definitely. And for the electricity emergency generators, purely is very much is for the data center around the world. And they need to have this DPF installed any of the data center they are building today, especially in combination with artificial intelligence because there's a lot of data center building especially for those ones. And they are definitely around the world. It's not only Europe and also in U.S. and so on. And we are actually been seeing as one of the preferred partners even also by some U.S. companies to provide this DPF to them. So what we feel is we have a quite good reputation in the DPF market. And the many -- very often, the DPF market is most to most measured. It's not really the massive marketing approach. So they have this very good relationship and also good reputation in the market. In many cases, actually customer they come to us and by themselves, but we're also going out to proactively going to some conference and try to find the target customers to really work with them. So this is a 2-way we are working on. And we are very excited to see this development, and we're really confident this DPF market is going to be continued growth market for us in the coming years or so.

All right. Fantastic. Very helpful. It appears we have no further questions here either online or through the teleconference. So Fei, I'll go ahead and 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 all soon again. Thank you.

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