future filtration - liqtech · marine scrubber systems pass engine exhaust through a spray of...

FUTURE FILTRATION

NasdaqCM: LIQT

www.liqtech.com

CAUTIONARY STATEMENT

Forward-Looking Statements

This presentation contains "forward-looking statements“ within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Although the forward-looking statements in this presentation 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 our 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 presentation.

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I. INTRODUCTION TO LIQTECH

II. MARITIME OPERATIONS

III. LONG-TERM GROWTH OPPORTUNITIES

IV. CAPACITY EXPANSION

V. FINANCIAL PERFORMANCE

TABLE OF CONTENTS

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Emission Technology Microfiltration Systems Ultrafiltration Systems

Membrane Housings Standardized Filtration Systems Membranes for OEMs

I. INTRODUCTION TO LIQTECH

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EXPERIENCED SENIOR MANAGEMENT

Sune Mathiesen

CEO

Claus Toftegaard

CFO

► Most recently CEO and majority owner of Provital Solutions A/S

► Broad experience in management and held several senior executive positions in listed companies

► Broad experience in sales and business development in global markets

► Most recently CFO of Gabriel Holding A/S, a publicly listed fabric company

► Previously served as CFO of RTX A/S, a publicly listed wireless company

► Financial Manager of Glenco A/S, a Danish mechanical services company

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COMPANY OVERVIEW

► LiqTech International, Inc. (NasdaqCM: LIQT) (the “Company”) manufactures and sells ceramic silicon carbide membranes and systems for liquid and particulate filtration

► The Company operates in the following markets:

► Marine Scrubber Market

► High-growth market driven by the International Maritime Organization’s (IMO) recent decision to implement a new lower cap on sulfur emissions from international shipping

► Analysts estimate that 8,000 - 10,000 ships will install scrubber water treatment systems by 2025

► Other Filtration Markets / Growth Opportunities

► Filtration of industrial wastewater, drinking water and pool/spa water, as well as diesel particulate filters (DPFs) for the control of soot exhaust particles from diesel engines in trucks and buses

► Continued momentum in core business

► Extremely strong backlog for LiqTech’s scrubber water filtration systems

► Also expect a significant number of new system orders in 2019 from the October 2018 framework agreement and a new product launch slated for June 2019

► Business poised for an inflection point in 2019

► LiqTech reported record quarterly revenue of $7.4 million in Q1-19, a 210% increase vs. Q1-18

► Also expect Q2-19 revenue to increase by 20%+ sequentially from Q1-19

6Sources: Q1 2019 conference call (5/14/19), 2018 Market Research Report on Global Marine Scrubbers.

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SILICON CARBIDE OVERVIEW

► Silicon Carbide (SiC) is the second hardest material on earth (behind diamond) and provides very high durability.

► The material offers longer lifetime than any other material used for DPF and membranes. Given the robustness of the material, it also offers greater versatility.

► SiC benefits add value to customers in terms of:

► Reduced operating costs – less energy is required, increased lifetime, reduced downtime for cleaning

► Installation costs – reduced number of components, cost of footprint/weight and construction costs

► Unmatched robustness for demanding applications with reduced downtime

► Product portfolio:

► Microfiltration

► Ultrafiltration

► DPF

The Benefits of SiC

HighDurability

LongerLifetime

GreaterVersatility

Adds value to the customer in terms of

Less energy required

Increased lifetime

Reduced downtime

Reduced number of components

Reduced cost of footprint/weight

Reduced construction costs

Reduced operating costs

Reduced installation costs

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LiqTech products are unique and all use Silicon Carbide technology

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II. MARITIME OPERATIONS

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2005 2010 2015 2020 2025

Open Oceans

Coastal Seas

► The International Maritime Organization (“IMO”) is a specialized agency of the United Nations, tasked with maintaining safety of ships and preventing pollution

► Founded in 1948, currently includes 174 Member States and 3 Associate Members

► IMO mission is to create a regulatory framework for the shipping industry that is fair and effective, universally adopted and universally implemented

► Covers all aspects of international shipping, including design, construction, equipment, operations and disposal

OVERVIEW OF IMO 2020

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NEW REGULATION – IMO 2020

► In 2010, the IMO began reducing the maximum allowable sulfur content in marine fuel, and has continued limiting sulfur content since then

► In 2016, the IMO agreed to limit the sulfur content in all marine fuels from current levels of 3.5% to 0.5%, beginning January 1, 2020

► Enforcement falls to each U.N. nation-state

► Port State Control: Each nation’s maritime authority (i.e., the U.S. Coast Guard) is responsible for enforcing IMO regulations – non-compliant shippers can’t buy or carry bunker fuel

► Non-compliant ships either incur fines or are held at port

► IMO 2020 will alter the industry for refiners and ship owners alike, as shippers look for new alternatives to meet compliance standards

MARINE FUEL SULFUR LIMITS

Source: International Maritime Organization (IMO) website.

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MARITIME OPPORTUNITY

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Marine Scrubber• Ship owner can continue to operate

on Marine Heavy Fuel (high-sulfur)

• ROI = 6 – 18 months

• Business case likely to improve due to limited capacity for low sulfur fuel

0.1% / 0.5% Sulfur Fuel Oil

• Very few suppliers can offer reliable global supply

• Price gap between low sulfur and heavy fuel expected to grow

CentrifugeFilter

• LiqTech system is the dominant product in the market

• Low ongoing maintenance

• Guaranteed to meet discharge limits

• Requires daily maintenance and supervision

• No guarantee to meet discharge limits – risk of fines

IMO 2020 Compliance

MembraneFilter

ILLUSTRATIVE PRICE DIFFERENTIALS

MT of Fuel Used per Month 1,000 MT per Month

(x) Est. Low-Sulfur / Heavy Fuel Differential $240.00 per MT

Incremental Cost per Month $240,000 per Month

(x) Months per Year 12 Months

Incremental Cost per Year $2,880,000 per Year

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► Marine scrubber systems pass engine exhaust through a spray of seawater to capture Sulfur and other impurities

► The produced wastewater is filtered, and then either recycled or discharged to the sea

► Water filter systems are a critical part of a marine scrubber, as they ensure the wastewater meets IMO-mandated discharge limits

► Wastewater filtration is accomplished by either Membrane Filters or Centrifuge Filters

MARITIME OPPORTUNITY

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Membrane Filters Centrifuge Filters

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BENEFITS OF MEMBRANE FILTERS

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Membrane Filters Centrifuge Filters

► Principle of operation: it is not physically possible for particles larger than the pore size to pass through the membrane –higher confidence in output

► Fully automated, integrated with online systems

► Minimal maintenance required – service contracts allow LiqTech to remotely access 24/7

► Modular design – easier installation, smaller footprint

► Output quality is guaranteed based on membrane specs

► Scrubber makers are increasingly shifting towards membrane filters as a more reliable alternative to centrifuge filters

► Principle of operation: centrifugal acceleration causes denser substances and particles to move outward – output quality varies based on the density of the media being separated

► Requires daily, manual maintenance – certain operators are not suited to provide (cruise ships vs. tankers)

► Requires more water use

► Larger and less flexible regarding installation

► Some “leap of faith” in output quality – risk of incurring occasional fines

► Cannot be remotely operated

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IMPORTANT COMPONENT TO SCRUBBERS

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Membrane Housing

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INCREASING ORDER BACKLOG

► Company has doubled confirmed order since January 2019

► LiqTech has signed framework agreements that have helped drive adoption

► March 2018 - Signed a framework agreement with one of the world's largest manufactures of marine scrubbers for more than

95 systems.

► April 2018 - Signed a framework agreement with a large marine scrubber manufacturer for a minimum of 35 systems.

► October 2018 - Signed framework agreement with one of the world's largest marine scrubber manufacturers, to develop a

new filtration system that will be smaller and less expensive than existing systems

► Will combine LiqTech’s SiC membrane filters with customer’s centrifuge technology

► Expected to receive a significant amount of system orders in 2019

► Additional growth being driven as more countries such as China and Singapore ban the port use of open loop scrubbers

► Install close loop scrubbers on their existing fleet

► Convert recently installed open loop scrubbers to close loop scrubbers

► Design into the specifications of their new ships a close loop scrubber system

COMPANY HAS MORE THAN 200 CONFIRMED ORDERS IN BACKLOG (MAY 2019)

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MARITIME GROWTH OPPORTUNITY SUM-UP

2019 is setting up to be a transformational year for LiqTech

► IMO regulations driving rapid adoption of marine scrubbers, to

which LiqTech has the early-mover advantage with a highly

competitive product

► Multi-billion dollar revenue opportunity over next 7 years based on

analyst estimates, with sustainable new build market into the future

► Framework agreements in place with multiple marine scrubber

manufacturers to deliver hundreds of units over coming years

► Sufficient balance sheet to meet growth demands due to efficient

working capital structure with customers and suppliers

► State-of-the-art Mark 6 system can be manufactured more efficiently

than any the Company has developed in the past, allowing for

further margin expansion in years to come

15Source: 2018 Market Research Report on Global Marine Scrubbers.

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III. LONG-TERM GROWTH OPPORTUNITIES

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LONG-TERM GROWTH OPPORTUNITIES:

► POWER PLANTS

Water Treatment Systems For Power Plants

► Tightening legislation within many countries driving need for water

treatment systems for Power Plants

► Leverage history of large scale reference in adjacent industries

► Oil and Gas, Drinking Water and Heavy Metal Removal from

industrial waste water

► Success within marine scrubber water treatment

► Large scale reference customers in other industries

► Expect to develop these industries together with water treatment

companies – licensing agreements

► Booked several orders in 2019 and have been specified for a number

of projects into 2020

► Expect significant revenue in 2020


www.liqtech.com

LONG-TERM GROWTH OPPORTUNITIES:

► NOx REDUCTION

NOx Reduction Product For The Marine Industry

► LiqTech and marine customers see tightening legislation for NOx

reduction

► Product is based on Silicon Carbide Diesel Particulate Filters – a

product we have been manufacturing for nearly 20 years.

► Leverage success within marine scrubber market LiqTech’s long-term

experience in the manufacturing of DPF´s to take advantage of this

new opportunity.

► New product ready for beginning of 2020


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IV. CAPACITY EXPANSION

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INVESTMENT IN MANUFACTURING

Hobro, Denmark

► Corporate headquarters► Systems manufacturing► R&D

Ballerup, Denmark

► Membranes manufacturing► DPF manufacturing

Minneapolis, USA

► DPF manufacturing

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LiqTech has placed orders for additional furnaces and plans to double its

production capacity by the end of 2019

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INVESTMENT – HOBRO EXPANSION

Existing building 19,375 ft²

New building 23,164 ft²

Total 42,539 ft²

Planned expansions will more than

double revenue capacity,

from $60 million to +$150 million

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Ballerup, Denmark

► 8 new furnaces► New extrusion lines► New drying area► Robots for cutting and coating

► +$150 million revenue capacity

INVESTMENT – BALLERUP EXPANSION

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V. FINANCIAL PERFORMANCE

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RECENT BUSINESS HIGHLIGHTS

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► Solid Finish to 2018

► Revenue of $12.2 million in Fiscal Year 2018 – a 7.8% increase from Fiscal Year 2017

► Began ramping up delivery of water filtration systems for marine scrubbers

► Record Start and Strong Expectations for 2019

► Record quarterly revenue of $7.4 million in Q1-19 – a 210% increase from Q1-18

► LiqTech returned to profitability in Q1-19, despite more than $0.4 million of non-recurring manufacturing costs

► Q2-19 revenue is expected to increase 20%+ from Q1-19 – a new quarterly record – driven by the continued ramp in shipments from the current order backlog

► The Company expects sequential quarterly revenue growth throughout 2019 and beyond

► Large and Growing Order Backlog

► Order backlog for LiqTech’s scrubber water filtration systems has more than doubled since January 2019

► Launching a new product with October 2018 Framework Agreement in June, and expect to receive significant system orders in 2019

Source: Q1 2019 conference call (5/14/19).

future filtration - liqtech · marine scrubber systems pass engine exhaust through a spray of...

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