Good morning, everyone, and welcome to the LiqTech International Reports Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. All participants will be in a listen-only mode, [Operator Instructions]. Also note, today's event is being recorded. And at this time, I'd like to turn the floor over to Robert Blum with Lytham Partners. Sir, please go ahead.

All right. Thank you very much. Good morning, everyone. And as Jamie mentioned, thanks for joining us on today's conference call to discuss LiqTech International's Fourth Quarter and Fiscal Year 2022 financial results for the period ending December 31, 2022. Joining us on today's call from the company is: Fei Chen, 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 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 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. Good morning or good afternoon to everyone on the call, depending on where you may be. I am excited to get the opportunity to speak with you all today. As those of you that have followed the company closely now, I took our as a CEO in mid-September, following a long career across a variety of global industry companies with emphasize on water treatment, chemicals and clean energy technologies. As I mentioned briefly last quarter, where I was at the ground first in 2012. I was introduced to LiqTech's technology, having seen the uniqueness of the company's silicon carbine membrane technologies are close and opportunity that I believe the technology enabled. Today, with six months under my belt, that feeling is only amplified. We have a tremendous opportunity ahead of us to leverage our highly unique technological advantages, brand competencies and sustainability value to build a growing and profitable business in the years to come. So the big question is, how do we get there and what is different today versus a few months ago? Following my appointment, we moved quickly to define our corporate vision and commercial strategy with a clear focus on recurring revenues and the large system opportunities. My initial actions included the hiring and appointment of a senior leadership team and the staffing of key sales personnel to accelerate revenue growth. These actions has already resulted in the expansion of recurring revenue prospects as we now, have a much larger and more reliable pipeline of swimming pool, DPF, membrane sales and plastic business opportunities. To that point, just last week, we received a large order for full commercial swimming pool water filtration systems in New Zealand, which deploys a complete filtration system solution, leveraging our enhanced Aqua Solution membrane. This project is an…

Thank you, Fei, and good morning, everyone. Let me add some color on the financial highlights for the fourth quarter and full year. For the full year, revenue was $16 million compared to $18.3 million in 2021, representing a decrease of 13%. Breakdown by vertical sales were as follows, system sales and related services was $5.3 million compared to $7.2 million last year, a decline of 26%. EPS and ceramic membrane sales were $6.8 million versus $7.2 million in 2021, a decline of 5%. And finally, plastic revenues of $3.5 million compared to $3.6 million, a year-on-year decline of 2%. As you can hear, the largest decline was in our Systems business, primarily due to a reduction in sales of water treatment systems to the global marine scrubber industry as well as lower commissioning activity. This partly offset by increased activity pertaining to our successful oil and gas commissioning in the Middle East and the start-up of the next project in the Mediterranean. The more modest decline in our Plastics and ceramics businesses reflect increased underlying activity, offset by currency headwinds due to the euro and DKK denominated revenue streams converted to U.S. dollar at a less favorable rate compared to prior year. Looking more specifically at the fourth quarter. You see that the revenue was $4 million compared to $3.3 million in the sequential third quarter, an increase of 22%. So as Fei alluded to, we are seeing a bit of a positive trend going into the New Year. In terms of outlook for the first quarter, I also echo the remarks made by Fei indicating a Q1 revenue of approximately $4 million, an improvement of about 11% compared to Q1 last year and flat compared to the fourth quarter of 2022. Looking at our gross profit for the…

Thank you, Simon. Before I turn it over to your questions, let me quickly summarize. First, we are moving quickly to accelerate the commercial and business development processes here at the company. We are simultaneously working to develop markets where we can create more predictable recurring revenue opportunities, leveraging our differentiated technology. We're also focusing on opportunities where we can deploy larger systems. We made nice progress on both fronts over the past few months. Second, we will continue to drive opportunities through our traditional direct go-to-market sales pathway, but also look to create new distributor relationships to address certain end markets. We have signed three new agreements since our last call and we expect to leverage my industry relationships to bring more agreements to fruition. Third, we have brought in highly accomplished commercial sales individuals that can help to develop and the market strategies, but more importantly, can exceed on those strategies. I believe we have a great team in place now. And finally, everything we are doing is set against the backdrop of achieving profitability. The organizational transition we are undertaking has proceeded with emphasis on utilizing our existing core competencies. We've seen 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 the $7 million in revenue, a number we think is achievable in the near term. I am extremely optimistic about future and I look forward to take any questions there might be. Operator?

[Operator Instructions] Our first question today comes from Rob Brown from Lake Street Capital Markets. Please go ahead, with your question.

Hi, Simon, hi, Fei. Just first question is on the kind of time to maturity of these distribution agreements that you put in place, how long do they typically take to mature? And how do you see them sort of ramping in the next year or so?

The distribution agreement we have signed I mean, if we take each of them, Liquinex has already working with us for some years. So this is actually accelerating what they've already done. So we definitely think it's a very mature relationship we just get more professional and more focused. So we have a high expectation on that. And the agreement with the NESR is really progressing also because we have close the dialogue and also close activity together with them. So we also would hope we can very soon get some results on that, even the oil, gas industry is a longer recycled time, as I mentioned and you also understand that. And the third one with eFlux [ph] technology, which is something we're already working on. So we just need to really scaling up the commercialization. So you can see all distribution agreement we signed is really with expectation has the effect already in the near term. It's not for long term. It's really near term, and this is very clear for us.

Okay. Thank you. Then in the systems market, can you just give an update on the pipeline in the major markets. How are those -- how is that pipeline developing? And how does it look at this point, I guess? And then maybe also an update on the marine market as well.

Yes. I mean, according to our commercial strategy, we actually did is we have two different pipelines, one is for the recurring business. And another one is for the larger system because the larger system has much longer recycle time. So the larger system, we have a quite strong pipeline actually. And we do expect we will have some projects this year but it takes longer time. So that's why it's not like a swimming pools coming very fast. But we are quite confident we have a very reliable and strong pipeline, and we expect to deliver something this year, definitely.

Okay. And if you get -- I guess, how long does it take to get revenue following orders in that business? And should you see revenue starting to ramp in that business in Q3 and Q4?

So Rob, Simon here. So first of all, I think the key thing here is to focus on what we have been trying to achieve over the last six months after they arrive and other seems to be the stronger and more predictable business. Again, with our pool marine scrubbers, aftermarket, EPS plastics and in membrane business. So again, that's what we call the recurrent business. And that is showing very solid progress. And you'll also see that when we disclose all the details on our Q1 basically, 45 days. So I think going -- and looking forward, and that's basically what you're asking for here. For us, it's a matter of creating this predictability, improving our recurring business. So we can basically have a more sustainable business with shorter, you can say, shorter decision cycle on the recurring business, but more importantly, revenue to pay for our fixed cost and OpEx. Now the more lumpier sizable growth projects, we still have some uncertainty with regards to the timing and hence, we will not guide on specific quarters. But as Fei alluded to, I think the commercial efforts both with strengthening of our internal sales team and distribution agreements give us a higher comfort that we'll deliver on these large growth projects later this year. So again, we can't specifically comment on the timing of those larger projects, but we can comment that we have increased confidence in our ability to deliver and secure those orders this year.

Last question is on kind of pricing actions you've taken. Have those start yet? Or are those more 2023 impact?

So I guess the key thing is to -- if you look at the Q4 numbers, and I guess, 2022 few as a whole has a lot of non-recurring items into it. But what I can confirm is definitely that we are reaping the benefits of both our cost reductions, but certainly also our profitability improvement measures on the pricing side. One thing that is also worth mentioning is that we in the latter part of the year really benefited from having our ERP system fully up and running. So we basically have full visibility on our individual orders on a cost basis. So again, our pricing has become sharper, but we have also been better at evaluating where we make money and where we want to put our focus. So long story short, we do expect to see significant improvements going into this year, both due to the fact that we don't have the non-recurring items, but certainly also because of our pricing and cost reductions combined delivers a significant impact to our business in a positive context.

Thank you. I’ll turn it over.

[Operator Instructions] And ladies and gentlemen, at this time, I'm showing no additional questions, I'd like to turn the floor back over to the management team for any closing remarks.

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

And ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines.