LiqTech International Inc (LIQT) 2023 Q4 法說會逐字稿

Welcome to the LiqTech International fourth quarter and fiscal year 2023 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to hand the call to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you so much, MJ. Good morning, everyone, and thank you all for joining us today on the conference call to discuss LiqTech International's fourth quarter and fiscal year 2023 financial results for the period ending December 31, 2023.

Joining us on today's call from the company is Fei Chen, Chief Executive Officer, and [Philip Price]. For those not familiar, Filip has recently assumed the role as interim 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, MJ provided the instructions on how to queue up at the beginning there.

Before beginning 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 Securities and Exchange Commission, including risk factors that attempt to advise interested parties, other risks that may affect the company's 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 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 call over to Fei Chen, CEO of LiqTech International. Fei, please proceed.

Thank you, Robert, and good day to everyone on the call. I'm excited to have this opportunity to speak with you and hear an update on the solid progress we have made during the last year. During 2023, we successfully executed a number of strategic initiatives to drive revenue growth, improve our manufacturing and operational efficiencies, and the strength of our balance sheet. We grew our revenue by 13% and increased our gross margin by 12 percentage points. Meanwhile, we reduced our operating expenses with $2.5 million and improved the bottom line with $5.6 million.

After taking over as the CEO in late 2022, I have introduced a new commercial strategy that has initially focused on stabilizing and growing our established business areas which are whole in terms of our ability to generate revenue. This effort includes reducing the length of the sales cycle we have in mass segments such as our commercial pool systems. And this also means facing new types of customer needs in areas where we have an extensive customer base. This includes, for example, diesel particulate filters, marine scrubbers, and other areas where we have recurring revenue opportunities, such as general aftermarket sales and plastics.

This established business markets provide a strong and stable base of revenue LiqTech and allows us to gain manufacturing efficiencies by leveraging our existing production capacity. The 2023 financial results clearly show that our new strategic focus is working. I will dive into more details on how we intend to continue focusing on improving each of our established areas in a moment. Before doing so, however, let's talk about what we refer to as our targets markets.

Where we have stabilized the business and brought about operational efficiencies, we are also setting the stage for growth in key markets where our high performance silicon carbon ceramic membranes can provide customers with strong returns on their investments. This include specific industrial filtration applications to remove solids, oil, [pathogens] and heavy metals from water as we are as come from emission and the industrial of gases.

While this has potential to encompass a large number of markets, we have narrowed our near-term focus to chemical and petrochemicals, such as phosphoric acid and monoethylene glycol and oil and gas produced water. These areas tend to have longer sales cycles. But it is our belief that if we align our sales with great partners and establish key reference customers, the sales cycles will decrease, and the large market opportunity will open up for LiqTech.

As I hope you all have seen from the two most recent press releases we issued over the last two weeks, this process has already begun. Last week, we announced that we have received a significant order for a containerized pilot system for produced water treatment from Razorback Direct. This marks our first ever US-based oil and gas produced water order. The containerized pilot system that Razorback Direct has required will be used at the customer site to test, demonstrate, and document the efficiency of LiqTech's ultrafiltration technology in treating produced water to facilitate beneficial industrial reuse and to meet current and future regulatory requirements.

And the longer tem, the intention is to use the results from this pilot operation as the basis to design and implement full-scale commercial systems for the onshore oil and gas applications in the US. The North American oil and gas market is going to be a key focus for LiqTech moving forward, led by our agreements with Razorback Direct who has a strong presence in key oil and gas geographies in the US. The speed at which this order came is really exciting, as we entered into a distribution agreement with Razorback Direct a month ago. This is clearly a significant milestone in our efforts to expand operations in North America, and we are really excited about the future perspectives and the potential it holds.

We followed up the US order from Razorback Direct with another significant oil and gas produced water commercial pilot order from National Energy Services Reunited on NESA in the Middle East. This unit will be used in Gulf Cooperation Council countries by one of the largest integrated energy and the chemicals companies in the world. This order has been in the works for some time, but encountered some delays towards the end of last year due to the conflict in the Middle East.

The delay accounted for the vast majority of the differences between our initially stated annual guidance and the results we concluded the year with. While we are certainly frustrated by the delay, we couldn't be more pleased to have moved this program forward. Once again, we believe that this commercial paper unit for produced water has the ability to open the doors for additional orders with this customer and the many other operators in the region.

It is important to note that the first oil and gas produced water units that we deployed in the Middle East in mid 2022 was a key reference point in receiving this order. That system has been now successfully operating for nearly two years, and our 99% of the safe water passing through it is being delivered back as clean brine permit water for reinjection.

[Young] produce to water for the oil and gas industry, another significant opportunity for us like we're seeing monoethylene glycol or MEC. During 2023, we had our first offshore installations in the Mediterranean with a large oil and gas client, which continues to perform well. As I mentioned last quarter, this was the first of a two-part order for the offshore project with expectations for follow-on orders soon. This however, has again encountered some delays due to the conflicts in the Middle East.

As a reminder, the platform is located just off the coast of Israel. We initially expected this second order to shilp in late 2023, but it will most likely year 2024 event now. As I stated at the beginning, where this oil and gas orders can initially have a long sales cycles, it is our firm belief that getting our foot in the door to showcase the capabilities of our systems will allow us to shorten future sales cycle and ultimately help us open a very large attractive addressable market.

Transitioning away from oil and gas, let us move on to first first asset, another key target market where we have recently reevaluated our position. In doing so, it has become evident that there is a broader opportunity for us in what recall the water chemical -- petrochemical markets, where our solutions have a superior value proposition.

In the past 15 years, we have sold membranes to 40 to 50 different customers for chemicals petrochemicals applications. The customers are very satisfied with our membrane filtration efficiency and excellent lifetime. We will therefore, work on establishing strong collaborations with selected system integration companies, OEM to penetrate is highly relevant and potential market place.

As you can hear, I am pleased with the progress we have made to advance our position within our target markets where our core technology can be easily adapted. Each of these areas provide us with a large addressable market and opportunity to unlock significant growth for LiqTech as we move forward. But as I have stated many times since I took over as CEO, I will not put all the company's eggs in one basket chasing opportunities that have longer sales cycles. We need to have a strong base that provides us with the revenue and the cash flows. That's where our established market strategy comes into play.

So let me just touch on a couple of focus areas within our established markets, starting with our commercial swimming pool products. During 2023, which essentially delivered 20 swimming pool systems in total. We now have more than 120 commercials from important installations across Europe and the Pacific Oceans regions. During 2023, we executed key distribution agreement with (inaudible) total pool to expand our footprint.

As we look into 2024, we will work on harvesting the results from our established partnerships and build our reputation further in the market. We are looking to further expand into key geographics where we don't have a presence such as in Germany, France, Netherlands, and United States. I am pleased with the progress we have achieved, and I look forward to continue mass adoption in the years to come.

Transitioning to our DPF and membrane businesses. Again, these are areas we're seeing our established markets where we have a extensive base of more than 50 long-term DPF customers and another 40 to 50 customers on the membrane side. We offer a highly defined value proposition to our customers across both Europe, North America for DPF and Europe and China for membranes. During 2023, our DPF and ceramic membrane business in combination generated $6.2 million in sales.

As we pointed out in our press release, we are seeing order flow improving for DPF, with new orders up 11% sequentially compared to first quarter of 2023. As we enter 2024, we will remain focused on building up new DPF customers in emerging areas such as black carbon emission and emergency electricity generation, nourishing our existing customer base. We are focusing on strategic customers with master agreements. On the membrane side, we are looking to scale up through OEM partners in China, Europe, and US. We think that there is a strong opportunity for this business to grow nicely in the years to come.

Finally, let's discuss our initiatives on the marine scrubber side. As those of you that have followed the company's closely for many years know, this was a very large part of the business in 2018 and 2019, driven by the pending introduction of IMO 2020, which regulated emissions on marine vessels. Since 2018, we have approximately 170 installations around the world with multiple types of ships. Unfortunately, the adoptation of IMO 2020 was impacted by the pandemic.

However, we saw the return of our first new marine scrubber system orders in more than 18 months as we deployed and upgraded modular design system through our recently enhanced distribution relationship with Joyo in China during the third quarter of 2023. While we still are not seeing the same adoption rates we saw back in 2018 and 2019, there does still appear to be a market for our solutions.

Furthermore, new types of marine fuels and engine technologies are currently being developed, and we believe our systems may be suited to support them. Therefore, our team is working to regain the relationship we had in the past and develop new agreements that will potentially put us in a position to regain the leadership position approved previously failed in this market.

Having completed my first full fiscal year as CEO of the LiqTech, I am proud of the accomplishments we have made. It is my firm belief that LiqTechis more relevant today than ever before. Our filtration solutions address key issues related to climate change induced freshwater scarcity, where are also here to reduce emissions, lower energy consumption, and increase productivities.

Our silicon carbon membrane solutions remove particles, oil, pathogens, and heavy measures from water, making it possible to recycle it for essential applications, thereby reducing stress on our freshwater resources. Our diesel particulate features reduce harmful emissions from diesel vehicles, industrial machinery, or power generators. We are also effectively removing black carbon emissions in maritime applications. And our commercial pools attrition provides significant environmental benefits and the cost saving with up to 80% less water usage, 60% lower energy consumption, and a 30% ess chloride salting.

Together with our partners, we create advanced filtration solutions for decreased and the gas purification that provides a clear value to our customers and contributed to a cleaner and more sustainable planet. We are executing against the business plan we have set for us with the strong operational and financial progress made in 2023.

As we look to 2024, we are confident in our ability to continue expanding our revenue base across both our established markets and the target markets. We're driving improvements in operational efficiency that remove company to breakeven this year.

Before I return it over to Philip to review the financial results, let me just take a moment to send Simon Stadil for his commitment to LiqTech for the past two years. Simon joined LiqTech at time of tremendous transition for the company and provide a steady hand and software insight when it was needed most.

As Robert stated at the beginning, Philip has assumed the role as interim Chief Financial Officer. Many of you have had a chance to meet with Philip over the past few months, and hopefully have come away impressed as I have with his understanding of LiqTech and our opportunity. Philip has assumed the role of Head of Group Finance for LiqTech for the last two years, and I look forward to his continued contributions as he stepped into the role of Interim Chief Financial Officer.

With that said, let me turn the call over to Philip to review our financial results in more detail. Philip?

Thank you, Fei, and good morning, everyone. Now let me add some color on the financial highlights for the full year of 2023. The reported revenue of $18 million represents an increase of 13% or $2 million compared to the $16 million reported for the full year of 2022, which underlines a robust result in a transition year for LiqTech with a new leadership team and revised strategy. We are pleased with the progress on both top and bottom line.

As Fei mentioned, we did experience delays in order delivery due to the escalating geopolitical unrest in Israel Gaza, which postponed project deliveries and client commitments in our oil and gas projects in the region.

Broken down by verticals, sales were as follows. System sales and related services of $7.7 million, an increase of more than 45% compared to the $5.3 million reported in 2022, due to a significant increase in pool system deliveries as well as the increased focus on our aftermarket activities.

Looking at our ceramics business, DPF and membrane sales ended at $6.2 million, down 9% compared to $6.8 million last year, reflecting a dedicated focus on improving profitability by carefully managing our revenue mix. And finally, plastics revenue and externally funded R&D projects of $4.1 million, up 6% compared to $3.8 million reported in 2022, underpinned by stable classics, order intake, as well as progress on key external R&D projects.

In summary, all system sales and related services experienced a significant increase, the plastics business continued its stable performance, and the ceramics business experienced a decline reflecting our focus on profitable deliveries. To be specific, the key revenue drivers during the year was a record high number of pool deliveries shipped to clients across Europe and Asia Pacific, but also the delivery of our first phosphoric acid pilot to China, continued progress on key projects within oil and gas and metal cooling, and finally, increased aftermarket sales with uptick in orders for both marine and acid applications, leveraging our global installed base.

Zooming in on our component business, our ceramics and plastic businesses executed on incoming orders with decisive focus on improving throughput and reducing lead times. In terms of our forward guidance, we expect the first quarter of 2024 to be comparable to the just ended quarter of 2023, with a top-line growth of approximately 3% to 8% and a gross margin ranging between 5% to 10%. We remain committed to growing our business over the coming quarters as we work intensively to execute on our ambition to further penetrate the global oil and gas, chemicals, and pool markets with our proven and industry-leading solutions.

Turning to our gross margin and more insight on our journey towards breakeven. We are pleased to report a full-year gross profit of $2.8 million, indicating a gross profit margin of 15.4% compared to just 3.5% reported for the full year of 2022. The result is within our previously disclosed guidance. The positive development compared to 2022 is a direct result of increased activity levels and better revenue mix as we continue to streamline our business, assuming on the markets well continue above profitable growth.

From an operational perspective, during the year, we have installed new kilns and revitalized our ceramics facility with new organization further complementing the positive momentum. We continue to have excess capacity, hence the immediate focus to compress the delivery lead times and ensure delivery of high-quality membranes and filters.

Taking a quick look at our contribution margin. We remain focused on closely monitoring this important KPI to ensure we develop a profitable and sustainable business with accelerated focus on meeting our financial objectives of breakeven. For the full year of 2023, our contribution margin ended at 46% and thus well above the 30% reported for the full year of 2022. Our contribution margin has historically been volatile as it directly correlates with the underlying revenue mix.

However, we have now succeeded in significantly improving and stabilizing our contribution margin well above 40%. On that note, we do maintain our quarterly breakeven target, measured on an adjusted EBITDA basis of approximately $7 million in revenue and potentially lower with the bad revenue mix.

Turning to OpEx, the full year OpEx of $10.6 million came down 19% or $2.5 million from the comparable full year of 2022. The result is evidence of our commitment on running a lean business by rightsizing and streamlining our operations. Our primary focus is to keep OpEx at a reasonable level to maintain our quarterly breakeven target. This ensures financial stability and support strategic investments for sustained profitability.

Other expenses of $1 million came down compared to the $1.9 million reported last year, with the development mainly explained by the increased levels of prior year due to the early repayment of the convertible note in 2022. Concluding on the P&L, we reported a net loss of $8.6 million compared to the net loss of $14.2 million reported in 2022. As evidenced, we still need to deliver profitable growth over the coming years to help safeguard our business and restore profitability. We are well positioned with excess production capacity and thus commercial order intake remains our number one priority.

Finally, let me briefly comment on our cash flow and balance sheet before summarizing and handing back over to Fei. We ended the year with $10.4 million in cash, down $6.2 million compared to the year in 2022. We took delivery of multiple machines and manufacturing equipment during the year with net cash used in investment activities of $2.9 million, all related to commitments made in previous years, in the context of our domestic and international expansion strengths.

The equipment has contributed to a solid upgrade to our manufacturing facilities. And therefore, we do not anticipate similar investments over the coming years as we are well positioned to growth within our existing capacity. Also, I'm pleased that during the year, we successfully extended our June 2024 maturity related to our senior promissory notes to January 2026.

In summary, the underlying cash flow profile is improving as we are showing progress on both top line and profitability combined with a more stable capital structure. Thanks, everyone, for your support and back over to you, Fei.

Thank you, Philip. In closing, we remain committed to executing against our strategic road map focused on long-term value creation. Over the past year, we have launched a clearly defined convergence strategy that has already yielded positive results. Going forward, our business will be underpinned by strong recurring revenues within our established businesses and an increased foothold in our strategic target markets. Net gross covered with full operational execution across our organization will be key to drive the change in gross margins and the positive cash flows. I look forward to continuing to execute against our strategic initiatives in 2024 to drive value creation for our shareholders.

With that, operator, we would be happy to take any questions.

(Operator Instructions)

Rob Brown, Lake Street Capital Markets.

Hi, Fei. Hi, Philip.

Hi, Robert, hello.

First question is on the of the good progress in the oil and gas kind of area with the US partner. Just wanted to get a sense, I guess, in both of new partnerships. How does that play out? Is there a -- what is the test period? And how does the our incremental order activity sort of play out what is it dependent?

Yes. As you have heard, we are very excited about this opportunity, because we actually just signed a distribution agreement with this new partner one month ago. And we are sure happy to see as things move so fast, we already have the first pilot plan and the way to US actually already this week. So really, we have been working with this partner very close together. And our joint goal is to make this pilot plant up running as soon as possible, and [another plant] in US, because that will be a very good showcase to the add potential partners and customers, and about our new technology for the produced water in the US, a very interesting market for us.

Great. Could you just sort of highlight some of the regulatory driver -- other drivers for this the system and what the customers are really interested in here?

Yes. I mean, the regulatory drive -- the situation is in US and especially in areas like Texas, New Mexico, and some other states is really the oil producing states. There's more and more water scarcity coming up, and the there's really discussion going on about the beneficial reuse of water, and costs for the industry, and for agriculture, and also for reinjection. And for all these applications and use, you do need to kind of treat the water before you do any other treatment.

So our US member is the best for the pre-treatment for produced water in oil or other uses. You can either use for the reinjection or use for the agriculture irrigation and also for the industry processing use. We can be the efficient first. So that is why our application actually is really directly related to the upcoming regulatory requirements. And but even not only regulatory requirement, even the industry is really ready to us, because it was looking at how to reduce the water.

Okay, great. Congratulations on that progress there. And then, sort of the glycol market, I think you had some delays there. How does that market sort of look at this point? Are you waiting really for that project to kick in? Or are there other customers that that system can used on? And then can you see growth of '24 in that market?

Yeah, the [MED] market, as we announced, we was expecting the second part of order coming already last year. And it was delayed because we need some operation period in the offshore platform. And that offshore presence from is right at the coast of Israel. So it was really be delayed. And then, everything was delayed quite longer than what expected in the beginning.

And now things are starting going back to normal. So we do believe we will have something will happen in 2024. As I say, it's going to be even in 2024. And we also start looking at other companies besides this company able to use this technology. So there's more potential also there. But definitely for this customers, we expect something to happen in 2024.

Great. And then last question is on the DPF market. It goes down a little bit as you've really focused on the margin there. How does that look in '24? Should that grow in 24? And I guess what's sort of the dynamics there that you see?

The reason that for DPF markets going down is because we got a very huge order from one customer in Asia, and that big order actually is not a very good margin for us. So we made adjustments. We do not want --- do not share any DPF to this kind of project. We really want to improve our profitability. So we changed our focus, and that's why the revenue goes down, but the profitability has goes up quite a lot significantly. \

And very happy to tell you, Rob, this year, the first quarter, the sales order for DPF actually increased 11% compared to the same quarter 2023. So we definitely expect a very nice growth of DPF this year. And the, growth for us, especially for some new emerging area that can supply carbon emission and also the emergency electricity generator for data centers around the world, and that was really increasing demanding. So we really believe it's going to contribute increase, quite nice increase this year.

Okay, great, thank you. I'll turn it over.

Thank you.

Lucas Ward, Ascendiant Capital Markets.

Hi, Fei. Hi, Philip. Good afternoon. Rob, good morning.

Hi.

Congratulations. I'm actually in your time zone, the Danish time zone right now. And yeah, this is exciting.I have a few questions. First of all on your business development, like if you look at your overall order book, how does it look? Is it getting better? Is it worse than it was, let's say, six months ago?

This is very, very relevant question. When I come in 2022 -- late 2022, I realized we have to build up a sales pipeline, because we do not have very nice sales pipeline at all. And that's what we have done in 2023, the whole year, to build up the new sales team and the sales pipeline. So I would say very confidently the project we made in looking into 2024 is based on the pipelines. And that's why it's much more improved than 2023.

Okay. So it is getting better. Can you also help us understand that sales cycle, again? It seems like a really important thing, like you've talked about the need to shorten it. When you look at system sales as an example, what is the time between you would typically get an order and when you would actually book revenues?

We have different segments, right? Each of the segments are different. And if I take the commercial pool system, as example, what we really have been doing in 2023 is really reduce the cycle from when we got order to we deliverm so we can book the revenue. And we have standardized our design and we streamlined our production, so the delivery time has reduced from 24 weeks to 6 weeks. So that means we we got an order today, maximum six weeks we are able to convert that into revenue, and that's really a significant improvement compared with before.

Okay. I guess in some of the target markets where you're still developing it, that you can't just do that right off the back, but the goal over time is to get that kind of efficiency. Is that fair?

Exactly. What we are doing is we're actually trying to standardize all the solutions for our system and markets. So in this way, we're able to really reduce the converting time and also, reduce -- to increase the quality and the stability of our system. So this is what we are working on across all the product lines actually.

Okay. Just shifting over to the regulatory environment. Would you say overall, it's getting better for LiqTech or are we going backwards? For instance, we've seen sort of a backlash against ESG. I mean, what are you seeing when you go out and trying to sell your systems in terms of the regulatory tailwind or headwind?

I mean, if you're talking from the macroeconomics point of view, definitely we are seeing the mega trends for the water scarcity and the further energy efficiency, and also for the air pollution improvement. So we are really having some very good megatrends on our back. So we really have some big potential. And one of the things we actually learned from our marine scrubber market is we have to really going out to work with customers, so have their needs, not only based on regulatory requirements alone, really based on their also business needs. So the markets we are working today, they are majority of them, not only based on the regulatory requirement, it's also because the customer really has needs.

Of course, the DPF area is very much a regulatory driven, but we have some very good trends there. Like a black carbon emissions from our entire industry is really more and more enforcement there. And also, the emergency generator for data center, we saw this as an efficient going in towards. More and more data center requests. And they have to have the [DPF] installed. So there are some really strong victoryin these areas.

And then, the oil and gas, as I discussed before, we drop. It is not regulatory requirement, it's also about the company really have actually nice, they would like to reduce the water. So in that way, we can kinf of more stable than rely on the regulatory requirements.

Got it. Okay. Just a financial question or two. Do you have your revenue growth outlook at this point?

So we are going to come in for the next quarter. And what we guide forward is if you can compare to the just ended quarter, we expect revenue growth of 3% to 8%.

Okay. Does that -- should we take from that that your visibility is not that confident about your visibility. that we would look into Q --

No, the reason we don't make them longer than that is, you know, our mix -- product mix is quite complicated. And some projects that are very big, some projects smaller, and so the dynamics are changing very much.

And so that's why we do have the forecast for the whole year. But this dynamic changing make it very difficult to say exactly when it's coming. So we feel it's more the reliable till quarter of time. In this way, we know exactly what's going to happen, because the dynamics very difficult reflects if you retain the hosting.

Okay. Last question and thanks for indulging me, what do you -- based on the mix that you're targeting, let's say, over the next year or two, what is your accounting breakeven revenue run rate?

So as we also mentioned before, we are still comfortable that our breakeven target revenue target is $7 million. It could be lower depending on the revenue mix, but that's what we're aiming at.

$7 million per quarter. So if we are able to achieve $7 million a quarter, we will be able to reach breakeven.

Okay, got it. Okay, thank you so much for answering all my questions.

Thank you very much.

(Operator Instructions) Craig Rose, Axiom Asset Management LLC.

Hello, guys. Thanks for taking my questions. As far as the produced water pilot programs that you are initiating with Middle East and with Razorback direct, what are the capital requirements to execute on those?

We are going -- we are selling these kind of systems to the partners. So basically, we're selling directly to our partners. So they purchase the equipment from us than they run at customer sites. They are saving further to the customer site. So this is a very good model for us, because we are a small company, do not have so much capital. So this is the way we're working on.

Okay. And what is the capacity that you're expected to offer as far as like barrels per day for the process you'll be involved in?

And in those small pilot units, we can treat the water between 3,000 to 5,000 barrels per day. And by our concept design, we're able to scale up to like 100,000 a barrel today. It's okay for -- we have a modern design concept, we're able to scale up. So that's why we are very excited to have those pilot projects going on, especially in US. We got very interesting market for us versus our strategic process market. And I hope this pilot unit up running fast, and we're able to gather data and also the showcase, then we are able to scale up to a full-scale commercial system in the US.

Okay. So 100,000 barrels per day, what would your process cost a service provider to buy that system that is capable of 100,000 barrels a day?

I cannot answer that question in here now, because it very much depends on what kind of water policy you have, because we need to address what kind of elements in our system and the strong. So it's very much a site-specific.

And also, there's a lot of conditions under a facility and site where we connect to that. So it is really -- that's something we discuss every time with the customer and the partner companies. With the request and we will discuss with them. And the more interesting thing is while discussing about the cost to trade for barrel of water , because that's what industry using to compare to each other. And we are confident our treatments costs, we are comparable with other competitive technology. This is one of the things we would measure them.

So what is that value? Is $1, $2, $3 per barrel?

It is a range. I think is between $0.5, $1, something like that.

Right. But as you said earlier, you're only doing a small portion of the cleanup of the produced water, correct.? You are at pretreatment, is that before or after they kind of clean some of the chemicals first to treat the water?

Depends on the --

Are you involved in like this at the end? Are you involved in taking the chemicals out in the beginning?

We are doing the pretreatment. So basically, if you're using water for reinjection, then our technology is efficient enough. You don't need any other additional technology, You will a need of water for agriculture irrigation, then you might need in desalination. And that's not something we are working. We are only working on our technology.

Okay. All right, that's helpful. The release was a little on traditionally and breaking out the fourth quarter (inaudible) I guess the formal release will be -- will have more detail of the specific quarter. Is that correct?

Sorry, I almost cannot hear what you said.

You reported full year, you did not breakout the quarter, that's a little untraditional. I guess your filings with the government will have more detail?

We are --whole last year and now, we gave a guidance for each quarter of time.

Thank you very much.

Thank you.

Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to management closing remarks.

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

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