Subjects: ERN, CCA, ERP
LiqTech International, Inc. Announces Second Quarter 2020 Financial Results
BALLERUP, Denmark, Aug. 10, 2020 /PRNewswire/ -- LiqTech International, Inc. (NASDAQ: LIQT) ("LiqTech"), a clean technology company that manufactures and markets highly specialized filtration technologies, announced today second quarter 2020 financial results for the period ended June 30, 2020.
Key Highlights
- Revenue of $4.6 million due to global impacts of COVID-19.
- Recent ramp-up in inquiries for marine scrubber filtration systems.
- Formed joint venture to supply water treatment systems for Middle East oil and gas industry.
- Launched standalone filter press for a wide range of industrial applications.
- Continued investment in new furnaces to increase total manufacturing capacity.
- Raised $7.3 million in private placement.
- Ending cash balance of $16.2 million.
Second Quarter 2020 Financial Results
Revenue for the second quarter of 2020 was $4.6 million, down 50.1% compared to $9.3 million in the second quarter of 2019. As reported previously, we saw a slowdown in inquiries and orders beginning late in the first quarter that continued through the second quarter. The slowdown in orders impacted revenue in the second quarter and is expected to also impact revenue in the second half of the year. However, recent inquiries for the Company's marine scrubber filtration systems have ramped up and we are beginning to win new orders.
Gross profit for the second quarter of 2020 was $0.5 million, reflecting a gross profit margin of 10.7%, compared to gross profit of $2.1 million in the second quarter of 2019 and a gross profit margin of 22.3%. The reduction in gross profit margin was due to the steep drop in revenue for marine scrubber filtration systems combined with a higher fixed cost base from the additional employees hired in 2019 and production facilities improvements. Approximately $0.1 million of non-recurring costs were incurred in the second quarter related to the installation of the second new furnace.
Total operating expense in the second quarter of 2020 was $2.4 million compared to $1.7 million in the second quarter of 2019. The increase in total operating expense was due largely to the increase in personnel hired during 2019. The Company took steps at the end of the first quarter to lower its overall cost base and anticipates annual savings of approximately $1.9 million in manufacturing and SG&A costs beginning in the third quarter 2020.
Total other income/(expense) in the second quarter of 2020 was $(0.6) million compared to $(0.2) million in the second quarter of 2019, unfavorably impacted by $0.2 million related to the fair value adjustment of the pre-paid warrants issued as part of the private placement in May 2020 and $0.4 million currency translation loss.
Net loss for the second quarter of 2020 was $(2.6) million compared to net income of $0.1 million in the second quarter of 2019 due largely to the operating loss of $1.9 million plus the increase in other expense as noted above.
Ending cash balance on June 30, 2020 was $16.2 million, compared to the cash balance of $6.3 million on March 31, 2020. This improved cash position resulted from the proceeds of the $7.3 million private placement completed in May 2020 and a decrease in accounts receivable.
Oil & Gas Update
The Company has entered into a joint venture ("JV") agreement to supply and operate water treatment systems for oil and gas producers in the Middle East. The formation of the JV follows the successful completion of several pilot projects that were based on LiqTech's unique and proprietary ceramic silicon carbide membranes. The focus of the JV will be to supply water treatment solutions in filtration applications where there is local water scarcity and oil prices will therefore have less impact on these projects.
Near-Term Outlook
As previously reported, incoming orders for the marine scrubber industry have been significantly impacted by the global impacts of COVID-19. This slowdown in new orders will also impact revenue in the second half of 2020. Recent inquiries for the Company's marine scrubber filtration systems have ramped up, and we are beginning to win new orders, although at this time we are not providing revenue guidance for the second half of the year.
Management Commentary
"I am incredibly proud of the efforts by the entire team at LiqTech during the past several months as we worked our way through the global impacts from COVID-19," commented Sune Mathiesen, CEO of LiqTech International. "We successfully delivered all orders to customers that were able to accept shipments in the second quarter. Following a slowdown in inquiries and orders in the past several months, we are beginning to see activity return to pre-COVID levels, which should bode well for the future. We believe the trends in the marine scrubber industry continue to favor increased adoption of closed-loop scrubbers, which should allow us to exceed industry growth rates of overall scrubber installations."
"We have worked hard to leverage our core technologies and advance new product development initiatives that have the potential to become important revenue drivers for the business in 2021. These include the signing of a joint venture agreement to address certain oil and gas market opportunities in the Middle East, the filing of a patent for our next generation filtration membranes to address applications in the pharmaceutical and beverage markets and the launch of a standalone filter press that can be sold in a wide range of industrial applications. We also remain on track to achieve our goal of increasing our manufacturing capacity to $150 million equivalent of annual revenue. These important initiatives should position the company for a stronger 2021."
Mathiesen concluded, "LiqTech is capitalizing on our vision to leverage our success in the marine scrubber market and expand our addressable market opportunities in new industry segments and products. As nations look to stimulate their economies in the wake of the COVID-19 pandemic, we believe that environmentally favorable solutions like those provided by LiqTech will gain significant traction."
Conference Call Details
Date and Time: Monday, August 10, 2020 at 9:00am ET
Call-in Information: Interested parties can access the conference call by dialing (833) 535-2206 or (412) 902-6741.
Replay: A teleconference replay of the call will be available until August 17, 2020 at (877) 344-7529 or (412) 317-0088, confirmation #10147008.
Transcript: A transcript of the call will be available on the investor relations section of the LiqTech website following the conclusion of the call at https://www.liqtech.com/investor-relations/.
About LiqTech International, Inc.
LiqTech International, Inc., a Nevada corporation, is a clean technology company that provides state-of-the-art ceramic silicon carbide filtration technologies for gas and liquid purification. LiqTech's silicon carbide membranes are designed to be used in the most challenging water purification applications and its silicon carbide filters are used to control diesel exhaust soot emissions. Using nanotechnology, LiqTech develops products using its proprietary silicon carbide technology, resulting in a wide range of component membranes, membrane systems and filters for both microfiltration and ultrafiltration applications. By incorporating LiqTech's SiC liquid membrane technology with the Company's extensive systems design experience and capabilities, LiqTech offers unique, turnkey solutions for the most difficult water purification applications.
For more information, please visit www.liqtech.com
Follow LiqTech on Linkedln: http://www.linkedin.com/company/liqtech-international
Follow LiqTech on Twitter: https://twitter.com/LiqTech
Forward?Looking Statements
This press release contains "forward-looking statements." Although the forward-looking statements in this release reflect the good faith 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 in these forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us 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, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.
We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this release.
Company Contact:
Sune Mathiesen, Chief Executive Officer
LiqTech International, Inc.
Phone: +45 5197 0908
www.liqtech.com
Investor Contact:
Robert Blum
Lytham Partners, LLC
Phone: (602) 889-9700
[email protected]
www.lythampartners.com
LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
For the Three Months Ended | For the Six months ended | |||||||
June 30 | June 30 | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Revenue | $ 4,641,483 | $ 9,297,186 | $ 14,923,327 | $ 16,718,384 | ||||
Cost of Goods Sold | 4,147,020 | 7,222,076 | 11,789,788 | 13,168,194 | ||||
Gross Profit | 494,463 | 2,075,110 | 3,133,539 | 3,550,190 | ||||
Operating Expenses: | ||||||||
Selling expenses | 605,947 | 514,037 | 1,282,747 | 997,623 | ||||
General and administrative expenses | 1,509,772 | 1,001,179 | 3,059,530 | 1,808,427 | ||||
Research and development expenses | 316,559 | 199,184 | 627,513 | 402,356 | ||||
Total Operating Expense | 2,432,278 | 1,714,400 | 4,969,790 | 3,208,406 | ||||
Income (Loss) from Operations | (1,937,815) | 360,710 | (1,836,251) | 341,784 | ||||
Other Income (Expense) | ||||||||
Interest and other income | 247 | 18,173 | 4,737 | 25,450 | ||||
Interest expense | (36,047) | (3,760) | (61,538) | (6,025) | ||||
Fair value adjustment of warrants | (236,900) | - | (236,900) | - | ||||
Gain (Loss) on currency transactions | (368,561) | (206,718) | (160,934) | (158,560) | ||||
Gain (Loss) on sale of fixed assets | - | (21,619) | - | (21,619) | ||||
Total Other Income (Expense) | (641,261) | (213,924) | (454,635) | (160,754) | ||||
Income (Loss) Before Income Taxes | (2,579,076) | 146,786 | (2,290,886) | 181,030 | ||||
Income Tax Provisions (Benefit) | (15,265) | - | (30,574) | - | ||||
Net Income (Loss) | (2,563,811) | 146,786 | (2,260,312) | 181,030 | ||||
Basic Income (Loss) Per Share | $ (0.12) | $ 0.01 | $ (0.11) | $ 0.01 | ||||
Diluted Income (Loss) Per Share | $ (0.12) | $ 0.01 | $ (0.11) | $ 0.01 | ||||
Basic Weighted Average Common Shares Outstanding | 20,963,186 | 19,211,771 | 20,758,855 | 18,742,029 | ||||
Diluted Weighted Average Common Shares Outstanding | 20,963,186 | 19,228,160 | 20,758,855 | 18,758,108 | ||||
LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES | |||
As of | As of December 31, | ||
2020 | 2019 | ||
(Unaudited) | |||
Current Assets: | |||
Cash, cash equivalent and Restricted Cash | $ 16,230,269 | $ 9,783,932 | |
Accounts receivable, net | 4,452,526 | 6,272,760 | |
Inventories, net | 5,356,614 | 5,199,238 | |
Contract assets | 4,523,130 | 5,664,929 | |
Prepaid expenses and other current assets | 753,229 | 566,398 | |
Total Current Assets | 31,315,768 | 27,487,257 | |
Other Assets: | |||
Property and Equipment, net | 6,407,932 | 4,825,952 | |
Operating lease right-of-use assets | 4,776,456 | 5,053,614 | |
Deposits and other assets | 499,470 | 498,053 | |
Intangible assets, net | 462,716 | 488,716 | |
Goodwill | 236,862 | 236,131 | |
Total Long-Term Assets | 12,383,436 | 11,102,466 | |
Total Assets | $ 43,699,204 | $ 38,589,723 | |
LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES | |||
As of June 30 | As of December 31, | ||
2020 | 2019 | ||
(Unaudited) | |||
Current Liabilities: | |||
Accounts payable | $ 2,073,842 | $ 4,339,070 | |
Accrued expenses | 5,209,103 | 3,222,951 | |
Current portion of finance lease obligation | 35,589 | 34,772 | |
Current portion of operating lease obligations | 957,971 | 999,685 | |
Current portion of contingent earn-out | 300,512 | 299,585 | |
Contract liabilities | 1,323,245 | 1,421,376 | |
Accrued income taxes payable | 14,736 | 14,692 | |
Total Current Liabilities | 9,914,998 | 10,332,131 | |
Deferred tax liability | 308,714 | 338,763 | |
Warrant liability | 2,811,900 | - | |
Finance lease obligation, net of current portion | 154,832 | 172,273 | |
Operating lease liability, net of current portion | 3,951,093 | 4,141,855 | |
Contingent earn-out, net of current portion | 601,025 | 599,170 | |
Total Long-Term Liabilities | 7,827,564 | 5,252,061 | |
Total Liabilities | 17,742,562 | 15,584,192 | |
Stockholders' Equity: | |||
Common stock; par value $0,001, 25,000,000 shares authorized and 21,649,213 and 20,547,668 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 21,649 | 20,548 | |
Additional paid-in capital | 66,364,654 | 61,398,150 | |
Accumulated deficit | (34,506,920) | (32,246,608) | |
Other comprehensive loss | (5,922,741) | (6,166,559) | |
Total Stockholders' Equity | 25,956,642 | 23,005,531 | |
Total Liabilities and Stockholders' Equity | $ 43,699,204 | $ 38,589,723 | |
SOURCE LiqTech International, Inc.
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