This call is being recorded on Friday, May 31, 2024. I would now like to turn the conference over to Brandon Chow. Please go ahead.
Thank you, operator. Welcome everyone to BluMetric Environmental's quarterly earnings conference call. This call will cover BluMetric's financial and operating results for the 2024 second quarter ended March 31st, 2024. Following our prepared remarks, we will open the conference call to a Q&A session. Our call today will be led by Scott MacFabe, BluMetric's CEO, and Dan Hilton, the company's CFO. Before we begin with our formal remarks, I would like to remind everyone that some of the statements on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties.
The company's actual results may differ significantly from the projected or suggested in any forward-looking statements due to a variety of factors which are discussed in detail in our regulatory filings. There may also be references to certain non-IFRS measures such as EBITDA, backlog, working capital, free cash flow, and net cash. These non-IFRS measures are not recognized measures under the International Financial Reporting Standards and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. Please see our disclosures for further information and reconciliations of these non-IFRS measures. I will now hand over the call to Scott MacFabe. Please go ahead, Scott.
Thank you, Brandon, for the introduction. Welcome, everybody, to our second quarter of the fiscal year 2024 earnings call for BluMetric Environmental. We appreciate all of you for taking the time to join us on today's conference call. As per usual, I'll start off by providing an overview of the second quarter, and Dan will go over our financial results in a little more detail. As a reminder, BluMetric is a full-service environmental consulting and clean tech firm. We focus on professional services and providing agile water and wastewater systems. We have a track record that spans over 45 years. BluMetric's evolved into a full-service integrator of environmental solutions in the fields of water, wastewater treatment, and professional environmental services. We aspire to be the environmental solutions and water clean tech company of choice globally. Now, let's discuss the second quarter in a little more detail.
We continued our steady trajectory this quarter, as showcased by our revenue and EBITDA generation. This is consistent with our commitment to sustainable profitability as we aim to grow our business. Revenues for the quarter were slightly down from the same period in the prior year. This is similar to previous quarters, where we had a reduction in lower margin, third-party subcontractors as a pass-through, and we were not able to fully replace that revenue. However, the reduction in that revenue resulted in a higher gross margin, which helped contributed positively to the bottom line earnings, which are up year-over-year. Overall, we continue to believe that more meaningful organic growth will come from our clean tech side of the business, and we're pleased by how activity is starting to ramp up.
As you recall, we've doubled our manufacturing footprint in Carp, Ontario, hired key sales staff, technical personnel, and created a new operation and maintenance division and have started building up inventory. Despite transitioning to a more heavy revenue clean tech company and making these growth investments, we are encouraged by the overall profitability from our business, which ultimately comes from the support of professional services. As a reminder, our sales cycle for clean tech products and services can be a multi-year event. Typically, it sees high dollar value contracts as well. I think this is a differentiating factor between us and many of the other clean tech companies who may have to operate at a loss for many years until they get enough commercial traction. As we transition into the second half of this year, our focus starts to shift towards the execution of our backlog and equipment orders.
We'll start to work on our recent CAD 5.3 million refurbishing contract with DND, which was announced earlier this year, and that work has started in Q3. That work is expected to continue within three quarters and be completed. Thereafter, there are other ongoing work with the DND we're working with on independent of that service contract. In addition, the team's building our first portable unit for Rheinmetall. That contract is ongoing, and we're in the middle of the process of finishing our prototype, which is under review. We expect to start work in full production on that contract in this fiscal fourth quarter. Furthermore, we're pleased that gross margins were up quarter-over-quarter, representing a significant increase from 37%-43%.
In our key markets, government revenues were up this quarter compared to previous quarter last year due to more Northern Canada work. Our commercial industrial segment has had a decrease in revenues year-over-year due to similar reasons as last quarter, resulting to larger remediation projects that concluded in fiscal year 2023. Our military market saw an increase in revenues due to the refurbishment of water purification systems for the Canadian DND, which is expected to continue into the fiscal 2024. As I mentioned, the other CAD 5.3 million dollar contract is in addition to that work, along with our other Rheinmetall contract. Lastly, our mining market saw a slight decrease in revenues, mainly due to our shift towards higher value services and providing our client, and improving our client portfolio, particularly in areas such as Northern Quebec.
We continue to be optimistic about our military market and clean tech systems, given the robust pipeline we're seeing through active proposals. Global geopolitical tensions are driving increased military spend, which BluMetric continues to be a beneficiary of. These trends support the company's goal to expand geographically by integrating its Mission-Ready Water technologies into a full service solution throughout North America and globally with other allied nations.... It's a crucial time for us to make sure that we deliver our products on cost and on time, while continuing to build on our sales momentum. As I always say, we believe that we're well positioned to capitalize on our growth opportunities. Our financial position offers flexibility to pursue optionality while benefiting from a recognizable brand in environmental consulting services and clean water technologies.
I'd now like to hand it over to Dan for a more detailed overview of the quarterly financials. Please go ahead, Dan.
Thank you, Scott. Today, I'll be presenting BluMetric's 2024 fiscal second quarter results in more detail. Revenue for the fiscal second quarter was CAD 7.1 million, compared to CAD 7.4 million for the quarter ended March 31, 2024. As Scott mentioned, revenues were slightly down due to the sales mix, which reduced low-margin flow-through subcontractor work, which in prior periods, had the effect of increasing our revenues but lowering our overall gross margins. Specifically, third-party project work decreased by CAD 0.9 million from CAD 2.6 million for the quarter ended March 31, 2023, to CAD 1.7 million in this fiscal quarter. Similar to last quarter, while gross revenues were down year-over-year, the net fee revenues generated continued to increase, which results in stronger margins.
There will always be volatility present in our business model from third-party subcontractors, but as we grow and include more clean tech products and services revenues, we hope for the impact to be reduced. Our gross margin was 43% for the second quarter, compared to 37% in the year prior. As I mentioned, this stronger gross margin reflects the higher margin contracts we executed, which included less third-party subcontractor reliance. Operating expenses for the first quarter came in at CAD 2.9 million, compared to CAD 2.6 million in the prior year. The increase is mainly due to increases in compensation costs, travel and marketing expenses, along with a benefit in last year's quarter from a bad debt expense recovery. EBITDA for the second quarter was CAD 0.4 million, compared to CAD 0.3 million in the prior year.
The increase in EBITDA is mainly due to the previously mentioned increase in gross margins. Net earnings for the first quarter were CAD 116,589, compared to CAD 79,925 in the prior year. On December 31, 2023, BluMetric had a net cash balance of CAD 2.4 million, consistent with what we saw for the period ended March 31, 2023. The net cash balance increased from the prior quarter due to the timing of customer billing based on milestone deliverables. Overall, BluMetric remains well-financed to achieve its objectives and maintains a clean capital structure with minimal debt and a strong working capital position of CAD 11.3 million. As of December 31, 2023, the company had approximately CAD 5.6 million in immediate cash availability. I apologize, that's March 31, 2024.
The company had approximately CAD 5.6 million in immediate cash availability between its operating line and existing cash balances. The company was in compliance with all of its banking covenants, which have been extinguished post-quarter end. That concludes my update on the financials, and I'd like to thank everyone for taking the time to allow us to present our results to you today. Then I'll hand it back over to Scott.
Thank you, Dan. That's a great update. We'll now take some questions from call participants, and we'll pass it back over to the operator.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear three-tone prompt, acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from John Lewis. Your line is now open.
Thank you, operator. Good afternoon, guys. Going by the press release, you're showing a CAD 16 million backlog for 2024. So I'm wondering, I guess, if we're to assume we'll fulfill that, that would maybe... You could help me with the math and tell me whether I'm right or wrong, means the sales would be flat for the year. So I'm wondering if there's any upside to this. Also, the company has been spending a lot of money on infrastructure for a while, so wondering where and, you know, that might start to show up in the results. I assume that if we hold true, then with the higher margin, we'll be a little more profitable.
John, I appreciate the question. Good to hear your voice. Let's talk on the first one. The bullet there, as you say, that's where we have currently available backlog to burn for the rest of the year. So of course, we don't stop selling now. It's just what we have generated year to date, plus what we have in the bank in terms of billable backlog to burn. Add on top of that, where we continue to push and sell through the rest of the year, should give, we hope, the investment community some confidence in the fact that we are in a good, solid position to meet or exceed our revenues from the previous year. And so, again, it's all about making sure that there's no surprises, no delays...
We continue to work on the same cadence of sales and booking new work; we should be in a good, solid shape. So really, that was the intent of that bullet. That was a new addition to our reporting. In terms of our profitability and our investments, I think what we're happy about is we've maintained the same kind of results that we have and steady, but at the same time, investing where we need to in our clean tech side of the business, along with some key hires in professional services too.
But at the end of the day, we are finding a way to blend our work that we're delivering on in clean tech, that generates immediate revenue, and some that's the front-end work, for instance, for our SUWPS contract, that portable system with Rheinmetall, that will really be in the production of revenue mode at the end of this calendar year and into next. So there is, I think that particular unit in the clean tech unit, is learning how to blend the work that we're working on and still stay well in the black. So that's where we're at on that. So really, we see that the big push on the production and outcome or revenue outcome in clean tech is really scheduled into next year, next fiscal year.
I think there was a third question in there, but I might have answered it, so-
Yeah.
Did I miss it?
No, that's fine. Last question. Any acquisitions in the pipeline? If so, how many? Wondering what multiples look like these days.
Well, that's a good question. I mean, to the extent that I can communicate it, we've developed a very robust pipeline. Two things are happening. We find that there is a gravity to BluMetric now, where there's organizations that want to be part of us, which is great. We look at those favorably, and we start with culture, then we look at the financials and then the future. And so we're deep into that now on more than one. And in terms of clean tech, we're also finding opportunities where not only are they being presented to us, but there is a gravity and interest to what we're doing in our Mission Ready Water business. And so those opportunities are also in deep review, specifically, by Dan and myself.
We're not gonna rush it. If we accomplish one or two of these this year, it'll be on the basis of same kind of diligence and conservatism that have got us to here in the first place. So we're very excited about possibilities. Any of these opportunities, should they close, would definitely be accretive to the business and a good story. So we're well aware that kind of organic growth that we generate now is not going to excite a lot of people. But at the same time, I think we've got a reputation where we definitely see a really nice, healthy pipeline of opportunities for M&A.
Okay, got it.
Multiple-
Thanks very much, and keep up the great work.
Thank you. Appreciate it. Appreciate your, your support, John.
Okay.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. There are no further questions at this time. I will now turn the call over to Scott for closing remarks.
Thank you, operator. Again, everybody, we really appreciate your attendance on the call. We look forward to your questions. We appreciate your support. Do believe that the team here is working very hard to exceed your expectations, and we hope to continue to develop the kind of business that you'll all be proud to invest in, in the future. So thank you again for your time. Look forward to speaking to you at the next quarterly call. So thank you again.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.