LiqTech International, Inc. (LIQT) is a leading clean technology company that specializes in the manufacture and marketing of highly advanced filtration products and systems. Headquartered in Ballerup, Denmark, the company has established itself as a trailblazer in the realm of ceramic silicon carbide filtration solutions, catering to a diverse array of industries ranging from marine, oil and gas, to pool and wastewater treatment.
Founded in 1989, LiqTech’s journey has been marked by a relentless pursuit of innovation and a steadfast commitment to environmental sustainability. The company’s origins trace back to the development of re-crystallized silicon carbide products, a proprietary technology that has since become the cornerstone of its offerings. Over the past three decades, LiqTech has continually refined and expanded its capabilities, solidifying its position as a trusted partner for clients seeking cutting-edge filtration solutions.
Product Portfolio and Global Reach
The company’s diverse product portfolio encompasses ceramic diesel particulate filters (DPFs) for emission control and soot exhaust particles from diesel engines, ceramic membranes for liquid filtration systems, and a range of plastic components catering to various industries. LiqTech’s expertise in nanotechnology and patented silicon carbide technology has enabled the development of proprietary products that serve a wide range of applications. The company’s global footprint extends to markets across Europe, Asia-Pacific, the Americas, and the Middle East, with a robust network of local representatives and distributors facilitating the seamless delivery of its technologies.
Financial Position and Liquidity
Despite the challenges posed by the prevailing macroeconomic uncertainty, LiqTech has maintained a solid financial foundation. As of September 30, 2024, the company reported a cash balance of $4.5 million, with a pro forma cash position of $13.3 million following a recent private placement. This bolstered liquidity provides LiqTech with the necessary resources to navigate the evolving market landscape and execute its strategic initiatives.
The company’s financial position is further characterized by a debt-to-equity ratio of 0.5428, $6.00 million in Senior Promissory Notes outstanding with the maturity date extended to January 1, 2026, and a current ratio of 2.66 and quick ratio of 1.62 as of September 30, 2024. These metrics indicate a relatively stable liquidity position, although the company continues to face challenges in achieving consistent profitability.
Revenue Performance and Market Dynamics
LiqTech operates in three reportable product segments: Water, Ceramics, and Plastics. In the third quarter of 2024, the company’s total revenue was $2.48 million, a 51.1% decrease from $5.07 million in the same period of 2023. This decline was primarily attributable to the delay in the delivery of a large $1.5 million commercial produced water treatment project in North America, which was pushed back to the first half of 2025 due to the customer’s decision to change the installation location.
Breaking down the revenue by segment, the Water segment generated $687,680 in Q3 2024, a 73.9% decrease from $2.63 million in Q3 2023. The Ceramics segment brought in $1.08 million, down 32.9% from $1.61 million in the previous year. The Plastics segment showed a slight increase of 1.0%, generating $663,200 compared to $656,690 in Q3 2023. The Corporate segment, which includes revenue from external R&D projects, contributed $49,710, down from $175,080 in the same period last year.
For the nine-month period ended September 30, 2024, LiqTech’s total revenue was $11.20 million, a 20.4% decrease from $14.07 million in the prior year period. The Water segment accounted for $4.11 million (down 33.1%), Ceramics for $4.55 million (down 5.4%), Plastics for $2.49 million (down 15.6%), and Corporate for $49,710 (down from $177,880).
The company’s performance varies across geographic markets, with the majority of sales coming from Europe (63.10% in Q3 2024), followed by the Americas (15.00%), Asia-Pacific (5.10%), and the Middle East/Africa (0.19%).
Despite these setbacks, LiqTech has maintained a robust pipeline of pilot projects and agreements across various industry verticals, positioning the company for future growth. In the oil and gas sector, the company successfully delivered four produced water treatment pilot units during the quarter, including one to Razorback Direct in the U.S. and another to a leading integrated energy company. These pilot projects have generated significant interest and are expected to translate into commercial orders in the coming year.
Expansion into Emerging Markets
LiqTech’s foray into the lithium brine production market has been a notable success. The company recently received an order from a leading technology company in the U.S. for its membrane filtration solution, which will be integrated into the customer’s ion exchange process to enhance the efficiency of lithium ion capture. This strategic partnership underscores LiqTech’s ability to expand its reach into emerging markets and leverage its core competencies to deliver innovative solutions.
Cost Reduction Initiatives
To address the ongoing challenges and position the company for long-term profitability, LiqTech has implemented a comprehensive cost reduction plan. This initiative includes a 10% reduction in headcount, a 10% decrease in base salaries for senior management in 2025, and a 50% reduction in cash compensation for the Board of Directors in 2025, among other cost-saving measures. The company aims to lower its breakeven target, measured on an adjusted EBITDA basis, to a quarterly revenue run rate of approximately $5.5 million, a significant improvement from the previous target of $6.5 million to $7.0 million.
Strategic Partnerships and Global Expansion
LiqTech’s commitment to innovation and strategic partnerships is further exemplified by the establishment of a joint venture with Jiangsu Industrial Technology Research Institute (JiTRI) in China. This venture, Nantong JiTRI LiqTech Green Energy Technology Company Limited, will expand the company’s presence in the key shipbuilding market and provide local sales, service, and spare parts support for its marine water treatment solutions.
Long-Term Growth Prospects
As LiqTech navigates the evolving market landscape, the company’s diversified product portfolio, robust pipeline of projects, and strategic initiatives position it well to capitalize on the growing demand for sustainable filtration technologies. While the recent setback in the North American produced water treatment project has impacted the company’s quarterly performance, LiqTech’s long-term growth prospects remain promising, with a focus on executing its operational efficiency improvements and leveraging its technological expertise to serve a wide range of industries.
The company operates in several end markets, including water filtration, diesel particulate filters, and plastics. The water treatment and marine scrubber markets are expected to see continued growth due to increasing environmental regulations and sustainability initiatives. The diesel particulate filter market is driven by tightening emissions standards globally, which aligns well with LiqTech’s core competencies.
Historical Performance and Resilience
The company’s resilience in the face of challenges is evident from its history. In 2021, LiqTech reported significant losses, with a net loss of $14.2 million, as it grappled with the effects of the COVID-19 pandemic on its operations and supply chain. This led to a focus on cost-saving initiatives and restructuring efforts to streamline operations and improve profitability. Despite these obstacles, LiqTech continued to innovate and expand its product offerings. In 2022, the company secured a $6 million debt financing to support its growth initiatives and made strategic moves to diversify its customer base and strengthen its presence in key market segments.
By 2023, LiqTech had established a solid track record of providing high-quality filtration solutions to a diverse range of industries, including automotive, clean water and pool filtration, marine, industrial wastewater, chemicals, and oil and gas. The company’s unwavering commitment to technological innovation and customer satisfaction has been instrumental in its growth and success over the past three decades, positioning it as a leader in the clean technology sector and a key player in the global effort to address environmental challenges through advanced filtration solutions.
Recent Financial Performance and Outlook
LiqTech’s financial performance in recent periods reflects the ongoing challenges and opportunities in its markets. For the fiscal year 2023, the company reported revenue of $18.00 million, with a net loss of $8.57 million. Operating cash flow was negative $4.18 million, and free cash flow was negative $7.08 million.
In the most recent quarter (Q3 2024), LiqTech reported revenue of $2.48 million, a 51.10% decrease compared to Q3 2023. The net loss for the quarter was $2.84 million, with operating cash flow of negative $1.75 million and free cash flow of negative $2.11 million. The significant decrease in revenue was primarily due to the aforementioned delay in delivering the large commercial produced water treatment project in North America and lower-than-expected deliveries of pool systems.
Looking ahead, LiqTech has provided guidance for Q4 2024, expecting revenue to be in the range of $3.3 million to $4.3 million, compared to $3.9 million in Q4 2023. For the full year 2024, this translates to an expected revenue range of $14.5 million to $15.5 million. While this guidance reflects ongoing challenges, the company’s cost reduction initiatives and focus on operational efficiency are aimed at improving financial performance in the coming quarters.
As LiqTech continues to navigate the dynamic clean technology landscape, its ability to innovate, adapt to market demands, and execute on its strategic initiatives will be crucial in determining its long-term success and financial stability. The company’s diverse product portfolio, global presence, and commitment to sustainability position it well to capitalize on the growing demand for advanced filtration solutions across various industries.
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