Good morning, afternoon, evening. And welcome to the LiqTech International Reports Second Quarter of Fiscal Year 2022 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference call over to Robert Blum. Please go ahead.

All right, thank you very much, John. Good day to everyone there and thank you for joining us during today's conference call. To discuss LiqTech international second quarter 2022 financial results. Joining us on today's call from the company are Alex Buehler, Interim Chief Executive Officer; and Simon Stadil, Chief Financial Officer. As the operator indicated, there will be an opportunity for an open Q&A session after the prepared remarks. Before we do prepare I'd begin those prepared remarks, we signify the record to following statements. This conference call may contain forward-looking statements. Although the forward-looking statements reflect the good faith and judgement 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 advice interested parties other 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 proving correct, 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 in 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 in conference call. With that said, I'd like to turn the call over to Alex Buehler, Interim Chief Executive Officer of LiqTech International. Alex, please proceed.

Thank you, Robert. And good morning to all of you and thank you for joining us on today's conference call. Please note that I sincerely appreciate your continued interest in and support of the Company and its growth strategy. Over the past two quarters, we have focused intensely on imperative spanning four dimensions; organizational; financial; operational; and commercial. All meant to stabilize the business and position it for imminent growth. I will step through all four dimensions as we endeavor to take inventory of our activities through this transitional period assess our progress and envision our future. Starting first with the organizational. We are pleased to announce the appointment of our new President and CEO Fei Chen. As a seasoned executive with a powerful blend of general, management, commercial, and product development capabilities, favoring to more than 20 years of management experience and a demonstrated track record of success across a variety of global industrial companies with an emphasis on water treatment, chemicals and clean energy technologies and with relevant exposure across our key end markets. He was most recently head of global R&D and Senior Vice President of global commercials for Topsoe, a world leader in catalyst and energy efficient clean technologies. Prior there too, she was the Innovation Platform Director for Grundfos, a global leader in water and liquid pumps where she was responsible for establishing their water treatment division. Importantly Fei’s attributes include strong transformational leadership, a buyer for execution discipline with pace and intensity. A great blend of commercial and technical horsepower to accelerate business growth and a track record of success across enterprises of varying scale. After a robust search process comprised of multiple interviews with many stakeholders Fei was the clear frontrunner, therefore we are indeed excited to welcome her to LiqTech. Fei will…

Thank you, Alex. Let me add some color on the financial highlights for the second quarter and overall outlook. Revenue for the second quarter was $5 million compared to $4 million in the second quarter of last year, this representing an increase of 25%. The revenue reflects an important step in the right direction with increased contribution from our systems business including deliveries within both oil and gas and our water and pool segment. But also stable volumes within our legacy DPF and plastic businesses. This was partially offset by the continued headwinds from the U.S. dollar appreciation against the Euro and Danish Krone negatively impacting our revenues as approximated 70% of our revenue in the second quarter was nominated a foreign currency. Compared to Q1, our current levels at 10% above Q1, U.S. dollar will continue to impact our revenue negatively going into Q3. Within our ceramics business that comprises EPS and our membrane sales to revenue of approximately $1.8 million was comparable to the same period of last year yet down 4% sequentially due to FX and mix with the latter reflecting a lower share of direct membrane sales and delivery of high volume EPS and lower average sale prices. In terms of outlook for the third quarter, I echo the remarks made by Alex indicating a third quarter that should be comparable to Q2 with a more diversified pipeline and continued robust contribution from our systems business underpinning the performance. This again will be offset by the continued FX headwinds and risk of slippage due to the longer lead times and a backend loaded pipeline with client demand negatively impacted by the continued geopolitical unrest and economic uncertainty. Chart in growth and improved forward-looking transparency, we are working diligently to strengthen our pipeline and secure new orders…

So before I turn the call over to the operator, let me just express my excitement as the way the team has stepped up and work together over the past five months during this leadership transition. We have accomplished much over this transitional period spanning organizational financial, operational and commercial imperatives. And I firmly believe that LiqTech is a great business with differentiated products, core competencies, large end markets and compelling value propositions. At this point, I would like to turn the call over to the operator to address any questions from the audience. Operator?

We will now begin the question and answer session. [Operator Instructions] Our first question comes from Robert Brown with Lake Street Capital Markets. Please go ahead.

Good morning. Thanks for all the detailed info on your presentation. First on the black carbon order good to see progress there. It was maybe some further color was that for one ship and what's sort of the pipeline of the black carbon market at this point?

It was actually for two ships. But at any rate our first systems for those ships with a very large end customer in China, as you would expect that end customer has many more needs as it's facing black carbon reduction in that market. So we are seeing kind of a filling of our sales pipeline with opportunities pertaining to the black carbon reduction market centered in China. I think it's good news to reiterate and reinforce kind of my earlier comment. We suspended our play in capital investment in China which was meant to establish a local presence to appeal to that among other customers. Yet despite that we are still serving that market from our facilities in Denmark. So taking advantage of our existing manufacturing footprint and fixed costs to penetrate that new and growing market in China.

Okay, thank you. And then just in terms of the sort of outlook, it seems like it's really more around FX and kind of some of the supply chain issues, but not so much demand. But are you seeing the demand activity happening? Are you seeing any changes there? Or how does the pipeline look at this point into the back half of the year?

Look, we're increasingly optimistic and excited about the shape. And let's call it the velocity of our pipeline. It's evolving nicely. It's growing. The good news is we are closing those things we set our mind to and set our sights on. I guess, if there is bad news, it's just taking a little bit longer than we expected, especially kind of through the holiday period here in Europe. I mean, we were expecting to close certain things before the summer holiday set in which we did not do. In many cases, we got a verbal but not written commitment, which slows things down by one, two or three months. So yes, it's taking a little bit longer. But we are closing orders and opportunities around our stated growth areas and strategic end markets for the business. So I think it's fair to say that Simon, and I and the rest of the team are increasingly optimistic and excited about our sales pipeline. But yes, unfortunately, this is just taking a little bit longer in the context of some of the headwinds we've already mentioned Rob.

Okay. Good. Last question on kind of gross margin. You said some things progress on yield improvements and some of the factory work. How do you sort of see your gross margins at this point? Is it really now dependent on getting scale and overhead utilization in the facilities with volume? Or do you have more to do in terms of yield and other process work?

No look on our march for manufacturing, optimization and efficiency, we're not there yet. Frankly we are speaking transparently. There's still a lot of work to do. But when you look at kind of the primary revenue, drivers of volume price and mix and then the cost drivers are sort of throughput and efficiency. We are diligently at work on all of those levers. We mentioned pricing in our prepared remarks. I mean, every new deal, we're ratcheting up prices to exceed kind of the inflationary cost pressure we're seeing in raw materials. And I also want to say that this company benefits from such a powerful mix. So that is to say if we can sell more tubular membranes and systems and less diesel particulate filters or DPF, the mix shift is simply mind blowing. So when we look at a lot of times we have conversations with investors about how do you get your contribution margin up to cover your fixed costs, and achieve breakeven in Q4, well, it's not only volume, it's also mix. So we are planning to shift that mix away or at least to complement our DPF sales with membranes and systems. And that has a significant uplift on our contribution and gross margins.

Okay. Thank you. I'll turn it over.

Yes, thanks, Rob.

[Operator Instructions] Our next question comes from Michael [indiscernible] with Monarch Capital Group. Please go ahead.

Hey, guys, thanks for all the color on the call. Just was wondering if you can give us a little bit more information, a little bit more detail around the opportunity with the acid filtration? Why it took so long to I guess commission the system and now that it is commissioned, how is it being used in the market opportunity for the system?

Yes, so I guess it when you say it took so long, obviously between shipments which was last year, Q4 of last year and now. Obviously, we started working on commissioning just for a few months this year, which to me it was not an obscenely long commissioning schedule the timeline. So I was pretty happy personally with the rate of commission. What typically happens though is you shake out the product, and there are system issues outside of sort of our core technology and competencies of membrane. So that is to say a pressure transmitter or a gauge or a POM or some ancillary devices. So that's the shaking out process that has occurred through the period. So they are using it a bit more color is for purification of phosphoric acid at a facility that produces phosphoric acid for sale across multiple end markets. Phosphoric acid is used in a variety of industries, including food and beverage and pharmaceuticals, among others. So if successful implementation of this device we’ll and should ultimately allow them to significantly cut their OpEx because it replaces other production steps that are very expensive, and ultimately, hopefully also increases their capacity and throughput of the plants. So obviously, we are there on site. In fact, yesterday and today, we are working with them to optimize to document our value proposition. And as I mentioned in the prepared remarks, also looking at a pilot on the next site, which is in Mexico.

Thanks guys.

Thank you.

[Operator Instructions] This concludes the question and answer session. I would like to turn the conference back over to Alex Buehler for closing remarks.

Thank you. I want to thank you all for your participation in today's call, along with your continued interest in and support of the company. I hope that you share my belief that we have accomplished a lot over the last several months. We have concluded a CEO transition, stabilized the organization, shored up the balance sheet, reduced headcount and costs, rationalize our investment plans, accelerated sales to drive margin accretive growth and solidified operations. To reassert and reinforce my earlier perspective LiqTech is a sound business that possesses core competencies. We are facing attractive end markets with regulatory tailwinds and ESG dimensions. We have differentiated technologies that confirm a position of product leadership, and we have compelling value propositions to connect products and systems to end markets. It was my distinct privilege to lead this organization during the transitional period as interim CEO and I sincerely appreciate the support and loyalty extended by our shareholders and employees. Please note that I am excited to turn over the reins to our new president and CEO, Fei Chen but also sad to step away from the organization as an operating executive. But please note that you are in great hands with Fei and I know that she will lead this fantastic organization through the next chapters of its growth story. Thank you all for your support, and have a great day.

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