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BQE Water Inc
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Hello, everyone. You should be able to hear me. Welcome to Q3 2022 earnings call. Where we're going to have a discussion with our financial results. Thank you, everyone, for joining on this webcast. [Operator Instructions]
And so before I begin today, I just wanted to have a quick introduction. My name is Heman Wong. I'm the CFO of BQE Water. And today, with me on the call is our Executive Chair of our Board, Peter Gleeson as well.
Hi. Good morning, everybody or afternoon, if you're in Europe.
Yes. So before we go over some of the results, I just want to remind everyone of our cautionary forward-looking information that is in our MD&A and also in our press release. I'm not going to bore everyone to read out the whole thing. But I assume you guys can go through that. So looking at our results for the third quarter, we continue on this our growth now on this trajectory. And we ended the year we ended the third quarter by adding a new recurring services revenue from our YUKON operation. And that was we started that in August, and we put up we received additional recurring revenues on that. We also as such, we also grew our proportional revenue by $205,000 compared to last year Q3. Our net income for the year is for the third quarter is EUR 573 million, and adjusted EBITDA was $1.4 million in Q3 2022. Lastly, we increased our working capital to $7 million at the end of Q3 and we increased our proportional cash that includes our share in the joint venture to $9.7 million as of the end of Q3 as well. Yes, I'll…
If you don't mind, Heman, I'll come in a little bit there on a preamble because I'm going to presume everybody has read our press release. So I don't want to bore everyone there. But I think what is important is that the Minto new recurring revenue that you mentioned is actually different to any other ones we've had before. This is actually an existing site where there was other operators there, and they run Well, the mine company actually asked us to look at and evaluate their operation. We made some suggestions and long story short actually asked us to go in and operate. So this will create revenue of roughly gross about $600 a year, about 50% margin on that Heman yes?
Yes.
That right. So it's very nice for us for an extremely short sales cycle to get in and we'll certainly be looking for more where we can take over operations from other people. Obviously, when it's our expertise that helps that not just for one of the bit description to arms 2 legs and 2 set of blue boiler suits. We're not in that particular market. So it's been a 2022 so far, there's been a really interesting year in a number of points. One is obviously our Chinese operation last year was pushed it right out of the park. And we this year, we've had a drag in China. So you'll see slightly less figures there. But we've also if you read our statement, you'll see that we brought on a lot of people ahead of our new operations that are both coming into play this year and next year as well. And that's just the cost of doing the business in the area we're in.
If you imagine that we are any mining site, including the ones we're at are generally in other geographical regions than the ones we're currently in. So we have to staff them up and you can't just staff them up on a date. You have to bring people in from the area, train people from the area, bringing commissioning teams there. There's a hell of a lot goes into it. So you will have seen that some of that this year in our costs. But hopefully, that's you can read for the figures and see that. We did as you said, we didn't want to bore you guys with regurgitate in our press release. So with your permission, Heman, I think we'll go to any questions you have. Are you seeing any questions up there?
No. So the chat function is now available now, and you may be able to find that chat box in your platform in the top right-hand corner. Feel free to put in any questions that you may have.
Seeing a hand there.
Okay. I see a hand raise.
I think you're going to have to open up the mic people are struggling with this open up the mics.
Yes, okay Give me some minutes.
Yes time. Is it open? Be patient with us. We're just trying to open up the mics people.
Can you hear [indiscernible]
Yes it's okay. What percentage of your revenue going forward? Do you think will be recurring...
The percentage?
Yes percent of recurring revenue going forward?
Yes. I mean, I'll let Heman answer on the numbers. But obviously, our objective is that, that overtakes all the organic growth that we're doing, that's part of building a recurring revenue company. But to date, where we sit in payment, roughly.
For recurring revenue...
What percentage of our revenue is recurring revenue?
Yes. Roughly.
No, pull it up it's not being heard.
Yes. Right now, our percentage or revenue, we will get 2. Close to USD 3 million a year canadian on an annual basis is our recurring revenue.
That's [indiscernible]
That will be this year.
Yes.
That will be this year.
Okay.
And then our [indiscernible] revenue is on 11%, 12% right now. So that's around 25% 30%.
Yes. Exactly. Sorry about that quick...
Can I put a question in or...
Yes yes go.
I just want to taking a look at the situation, I'm wondering what we're going to do with all this cash.
Oh, we're going to spend it no quickly, no. In fact, it's one of our issues that we're constantly thinking about i dont know. In fact, I think it's fair to everyone is both senior management and Board have sat down and looked at many potential things we can do, including buyback or dividends or acquisitions or whatever, we look at everything. I think today, I look at our share price being certainly from our side, being extremely devaluated and hasn't really moved with all the promise we have. Certainly, we're less than enterprise value, which gives nothing for all our blue sky out there.
So there definitely will be looking at for that maybe we should be buying our own shares back or whatever out there. But we're looking at everything. acquisitions like we did last year with the top of cyanide. And with Randy coming on, actually, we're a year into it now. And the relative costs were negligible. I mean it really didn't affect our bottom line at all. And that's actually ended up being a great acquisition. It's got us in the door of a lot more companies that wouldn't have been considered working with us because they just had a cyanide problem. And already 1 or 2 of them, we're actually looking at vulnerable areas on their water management. So we are looking at everything quick.
I certainly I know most people on the call would be wondering cash when is dividends and the, the reality is of course it's in our conversations, but I only want to start or certainly the [indiscernible], I say I, I mean we only want to start it. When we actually know we continue it and keep increasing it, it's a it'd be a cardinal sin to release a dividend and then not continue it. But it is in our conversations, but we're not there yet. Does that answer your question?
Yes, it does. But you won't give me a date you're saying?
Sorry.
You won't give us a date is what you're saying.
No, I can't give you I don't think you shareholders out there, I don't think would thank me too much if I started it and then didn't continue it.
I agree. I agree. It's just that we've never seen this kind of cash in this company before. So it's...
Well, I hope all shareholders will recognize that we're going to protect their funds because it's everybody's funds here as much as possible. And the acquisition last year that showed that, we are looking at another one of a similar size, i.e., someone in the industry as I a ton of respect and therefore, would get us in a lot more doors and relatively no money. But acquisitions on our size of company, are hard because we're not going to be flippant with it.
We need things that are going to be accretive to us, get us in other areas like Randy with the cyanide destruction where it was already in cyanide recycled, and so that make complete sense. And we've looked at people one of the things we're concentrating on is getting us in the door even earlier, so many mining companies bring us in, yes, when they feel they have to go for permit or whatever. But we'd like to be in earlier when they're actually doing the initial toxicity studies. And there, they tend to go for people that just deal with toxicity. So then kind of things, 100% accretive to us, we're looking at quick...
Just to circle back on the recurring revenue. So not that i actually have numbers in front of me, I'm more comfortable to talk about it. Looking at the new operations that we had in this year in 2021, the aggregate of our 2 U.S. plants and with the Minto operation, it brought us more than $1 million, just north of $1 billion in revenue. And for this year, 2021, our Raglan 22 our water treatment for Raglan. It's a bit less than last year based on the demand that they need on site. But with our new operations, we bought in north of $1 million compared to last year. And forecasting into Q4, that's going to be with mental and all the operations keep going. You're looking at like 1.3%, 1.4%. And that's the new revenue that will continue on into 2023 next year. It is $1.4 million...
So it's still that's new revenue, but we're still talking 30% of overall.
Exactly. Yes. Yes.
Quick's question was percentage... Yes. And we the aim for all shareholders out there is that, that number continues to increase. And if you look at our pipeline, obviously, that 70% 65%, 70% of organic growth that you're seeing is us being in the door of other potential recurring revenue projects and we really it's very rare of course, it does happen on occasion. But it's very rare that we're actually in a project that we're not looking at potential recurring revenue. And that may be 2 years, 3 years down the row, but that is the ultimate aim on all the projects we're in [indiscernible].
And speaking about new recurring revenue for next year 2023, we already have 2 plants that we will be starting up next year and potentially a third one as well.
Sure. We are not unnecessarily. I think if anyone spoke to us 18 months ago or whatever, we was at a run rate of 1 plant a year, we would get to 2 plants a year. And a long way off with 3 plants a year. Well, we're at a run rate of 2 a year now of recurring revenue. And as Heman said, it may even be [indiscernible] which is even ahead of our schedule.
So for others on the call, maybe you can raise up your hand first. I'll call up your name and as you can unmute and continue on your questions. So we just dont have a traffic jam on the phone.
Yes. Yes, that's a good idea, man. If you just raise your hand, if you have any questions or certainly enough of you there, so and thank you, everybody, for joining. I see a nice list of people there Somebody else must have some questions.
Yes. Go ahead, [ William ], feel free to mute and ask your question.
I can figure out if I can figure out how to unmute. Well, I'm interested in your comments about buybacks because I do think that for a company this size and for the potential and the growth that we're seeing, the share price is undervalued considerably. And do you have any ideas regarding when you might make an announcement in that regard? Or is this something the Board is just discussing?
No. It's something we're let's just say seriously considering. We have to be realistic to where we are in liquidity and how much we may actually get. But I don't believe that at least we will be able to tell market that we think we're massively undervalued. And there's always an argument for saying, well, you'll cause less liquidity, but the reality is there is none at the moment anyway. And David, I and Heman have done a hell of a lot of going out there trying to sit in front of the family offices trying to talk to investor groups and whatever. And it seems at the moment that at least it will be, i.e., a great use of funds, but also a good message to the market that we actually believe in where we're at. So it is William, it's a very serious consideration. And obviously, I'm not going to give you any nonpublic information, but I will say it's a very serious one of the options yes.
So you can't put a date on that yet?
I can't because I would be giving you nonpublic information, unfortunately. But again I'll just leave it at that. I just don't want to put anyone in a terrible situation. There was someone else up there, Heman.
Yes, I'd like to know with the turmoil going on in China. Is there going to be a problem going forward of like repatriating the cash you generate there out of China and into your hands?
We've had, [ Jim ], we've this is a conversation we constantly have, and it's a worry and that earlier question that [ Quigg ] asked about the percentage of recurring revenue has always been so high in China that's its worried the life over should something happen because we today, we're not any more worried than we always have been. The Chinese government can make a decision tomorrow. We have a great relationship with JCC. And obviously, it's a government the largest copper producer in China. We not only have a great relationship with them. They're actually asking us to look at new things for them. But should the Chinese government decide not to not allow us to repatriate the funds.
There's absolutely nothing we can do about it except exactly what we're doing is trying to mitigate that liability as much as possible. If you'll notice on our figures this year, we actually pull the money in as soon as possible because there was a lot of talk going on about exactly this issue. So we get on it as soon as we can. We pull it in as soon as we can. Obviously, if we can't repatriate it, we at least to have one would hope it's not forever. And we do have other operations out there where we could at least use them funds. So we are aware of it, Jim. We are I think we worry as much as you, but there's absolutely nothing we can do about it. We're certainly not going to refuse to do the business out there that's been really good to us.
Yes, just to add on, like what Peter said, we can't control what we can't control. But on the flip side, I just want to remind everyone for the first half every year, we get the dividend back every year. And for the past so many years, every year, we ask for it annually. And it's just the money is coming back earlier and earlier. So we had a great relationship with our partner. And in terms of the secondary option that Peter mentioned about, we do have a wholly owned subsidiary in China that we are using that to operate our SAR plants in China. So there's other methods to redirect money may not be in Canada, but it's not like we will can get directed to our subsidiary in China.
Yes. And that's actually an important question because when we went over an important answer. When David and I step in, Jim, one of the things was we was absolutely going to de-risk the use of cash by the old company, i.e., biotech, which we did. And one of them going into the SAR plants, we did, in fact, one of them was the first one that we proved we didn't have to put up money to actually gain a percentage of the entity. So we have outside finances, finance our projects in China at the moment, and that's that joint venture Heman is talking about. I'm not I'm certainly not saying we are going to do this, but that would be an option that we could actually finance more and have more wholly owned SAR plants out there. possibility. I'm just thinking on my feet. I see Quigg's hand. Is that raised again?
Yes.
That's the second time. So go ahead, Quigg.
Yes, please.
Question is, there seems to be a pretty big interest in fixing up old mines in this country, cleaning them up, like the headlines in the Global Mail this morning reported business. But they're all huge numbers. I mean like $4.7 billion for this giant mine to reclaim it and things like that. Are we likely to benefit from this? Or is this going to be all going to the huge companies that can take down the whole job on their own.
Well, it's interesting because a few years ago, people wouldn't have looked to us because they said, oh look, their balance sheet. Now nobody mentions our balance sheet. And we're actually getting in these larger conversations, Quigg. I'm not saying we're going to win them up. I certainly don't want to make any false promises to our shareholders. But we're we've actually been asked to present to so many certainly federally sort of Canadian government and provincially to the BC government on selenium regulations, in fact, in the draft report on coal mining that the federal government brought if anybody is interested in reading 590 pages, very unusual for a government agency that the only process they actually mentioned was ours.
So that old punching above our weight. So we are in the conversations now. That said, sometimes the much larger voice can put up monstrous amounts of capital to build these gigantic plants. And we've actually had one of them talk to us recently about working alongside MI, the capital. It's very, very early stages and these things get talked about forever. But we're having some conversations whether it happens or not we'll certainly let you know if it does, but it's I'd like to say, for such a small company to even be in these conversations is refreshing for us, Quigg.
And refreshing for your shareholders as well.
Absolutely. Anyone else out there?
I See no more questions.
Okay, guys. If you have any questions, please, that's what we're here for. And also understand...
I think Jim put up his hand. Go ahead, Jim.
Yes. I have another question about you had one project in which we were working with the utility involving coal ash... Any other projects in that area? That seems like a huge possibility of added business.
It is. And it is it's I heard on MPI one day that they described it as the largest environmental liability issue in the U.S., all these [indiscernible] sitting out there. So yes, we are getting our inquiries Jim. Nothing concrete yet. But we're getting other inquiries and from power stations as well in other respects, i.e., flu gas and that. So it's interesting. Certainly, our laboratory is working on other water for these people. So yes, we are getting some inquiries in this area, but nothing concrete yet to -- and it's actually to add to that. It's an interesting area for us because all these certainly these U.S. utilities are going to have to spend a lot of money cleaning up these [indiscernible].
So we don't know any other questions? No? hearing none. Well, and the guys will as you as the management team and the Board, we'll carry on trying to do the good job we're doing. I hope you recognize this year for the growth in human resources that we've had, which is all anticipated on the growth of recurring revenue appearing both next year and for years going forward. And the very nice thing that the Minto Mine is a new operation for us that we spent no time building up to we're certainly going to look at can we get into more operations like that on a very short sales cycle. And we look forward to giving you the end of year figures in early 2023.
Around -- yes, mid to late April.
Yes.
We expect the year-end results other results.
Yes. So not early, I apologize, so in doing that. But thank you all for your support. We're going to do everything to get that share price up or get people to recognize us or try to get family offices or institutions to look at us. If you know of any or you want to put us in front of anybody, please feel free to do it. David, Heman and I are very happy to talk to anybody who you think could be a potential investor. And with that sorry, no other questions, Heman?
No.
No Okay. Thank you for your participation. Thank you very much.
Thank you, everyone. For joining.