Hello everyone. Should be able to hear me. Welcome to Q3 2022 earnings call that we're gonna have a discussion with our financial results. Thank you everyone for joining this webcast. Just want to remind you that in our webcasts this today, that it will be in a listen-only mode, and that the webcast is being recorded and it will be available on our website shortly after. After the quick-
Summary
summary, we're gonna have a Q&A session mainly in this call and guests are welcome to use the chat function. In your application, there should be a chat box at the top right-hand corner with a little word bubble. You're welcome to type your questions in there, and then we can go through that in due time. Before I begin today, I just wanted to have a quick introduction. My name is Heman Wong. I'm the CFO of BQE Water. 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.
Yeah. Before we go over some of the results, 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 gonna bore everyone to read out the whole thing, but I assume you guys can go through that. Looking at our results for the third quarter, if we continue on this, our growth, this trajectory, we ended the third quarter with by adding a new recurring services revenue from our Yukon operation. We started that in August, we received additional recurring revenues of that. As such, we also grew our proportional revenue by CAD 200.
CAD 205,000 compared to last year Q3. Our net income for the year is for the third quarter is CAD 573, Adjusted EBITDA was CAD 1.4 million in Q3 of 2022. Lastly, we increased our working capital to CAD 7.8 million as of the end of Q3. We increased our proportional cash that includes our share in the joint venture to CAD 9.7 million as of at the end of Q3 as well.
I'll If you don't mind, Heman, I'll come in a little bit there on a preangle 'cause I'm gonna presume everybody has read our press release, so I don't wanna bore everyone there. 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 weren't. Well, the mine company actually asked us to look at and evaluate their operation. We made some suggestions, and long story short, they actually asked us to go in and operate. This will, you know, create revenue of roughly gross about CAD 600 a year, about 50% margin on that, Heman? Yeah?
Yeah.
Is that about right? 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 want of a better description, two arms, two legs, and two set of blue boiler suits. We're not in that particular market. It's been a, you know, it's 2022 so far has 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. This year we've had a drought in China, so you'll see slightly less figures there.
We've also, if you read our statement, you'll see that we've brought on a lot of people ahead of our new operations that are both coming into play this year and next year as well. That's just the cost of doing the business in the area we're in. If you imagine that any mining site, including the ones we're at, are generally in other geographical regions than the ones we're currently in. We have to staff them up. You can't just staff them up on the day. You have to bring people in from the area, train people from the area, bring in commissioning teams there. There's a hell of a lot goes into it. You will have seen that some of that this year in our costs. Hopefully that's.
You know, you can read through the figures and see that. As I said, we didn't wanna bore you guys with regurgitating our press release. With your permission, Heman, I think we'll go to any questions you have. Are you seeing any questions up there?
No. 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 none there.
Okay. I see a hand raised.
I think you're gonna have to open up the mics.
Yeah.
People are struggling with this. Open up the mics.
Yeah. Okay. Give me a second.
Yeah.
Okay.
It's fine. Is it open? Be patient with us. We're just trying to open up the mics, people. Can you hear me?
Yep. Gotcha.
Yes. [Quigg]. What percentage of your revenue going forward do you think will be recurring?
The percentage?
Yeah. Percent of recurring revenue going forward.
Yeah. I mean, I'll let Heman answer on the numbers, but, you know, obviously our objective is that that overtakes all the organic growth that we're doing. That's part of building a recurring revenue company. To date, where are we sitting, Heman, roughly?
For recurring revenue?
What percentage of our revenue is recurring revenue?
We're roughly... Give me a sec. My computer is not
No, pull it up. Chop your head.
Yeah. Right now, our percentage of our revenue, we will get Close to CAD 3 million a year on annual basis is our recurring revenue.
That's historic.
That will be this year, basically.
Yeah.
That will be this year.
Okay.
our
I-
Total revenue
Okay
... around 11, 12 right now. That's around 25%-30%.
Yeah. Exactly. Sorry about that, [Quigg].
Can I put a question in or is it? Am I not?
Yeah, go.
I just want-
Go for it.
Taking a look at the situation, I'm wondering what we're gonna do with all this cash.
Oh, we're gonna spend it. No, [Quigg], we're not. In fact, it's one of our issues that, you know, we're constantly thinking about. You know, in fact, you know, I think it's fair to everyone is, you know, both senior management and board have sat down and looked at many potential things we can do, including, you know, buyback or dividends or acquisitions or whatever. You know, we look at everything. I think, you know, today, you know, I look at our share price being certainly from our side, being extremely devalued and hasn't really moved with all the promise we have. Certainly, you know, we're less than enterprise value, which gives nothing for all that blue sky out there. There definitely will be, you know, looking into that.
You know, maybe we should be buying our own shares back or whatever out there. We're looking at everything. You know, acquisitions like we did last year with the detox of cyanide and, you know, 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. 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, you know, they just had a cyanide problem. And, you know, already one or two of them, we're actually looking into other areas on their water management. We are looking at everything, [Quigg]. I, you know, I certainly...
I know most people on the call will be wondering, you know, cash, when is dividends and that? The reality is of course it's in our conversations, but I only wanna start or certainly the board, I mean we only wanna start it when we actually know we continue it and keep increasing it, you know? It's it'd be a cardinal sin to release a dividend and then not continue it. It is in our conversations, but we're not there yet. Does that answer your question?
Yeah, it does. You won't give me a date is what you're saying.
Sorry?
You won't give us a date, is what you're saying?
No, I can't give you a date. Shareholders out there, I don't think would thank me too much if I started it and then didn't continue it, you know?
No, I agree. I agree. It's just that We've never seen this kind of cash in this company before.
Well, I hope all shareholders will recognize that, you know, we're gonna protect their funds, 'cause it is everybody's funds here, as much as possible. You know, the acquisition last year, you know, it showed that. We are looking at another one of a similar size, i.e., someone in the industry who has a ton of respect and therefore would get us in a lot more doors at relatively no money. You know, acquisitions at our size of company are hard 'cause, we, you know, we're not gonna be flippant with it. We need things that are gonna be accretive to us, you know, get us in other areas like, you know, Randy with the Cyanide Destruction where he was already in Cyanide Recycling, so that made complete sense, you know.
We've looked at people. You know, one of the things we're concentrating on is getting us in the door even earlier. Many mining companies, you know, bring us in, yes, when they feel they have to go for permitting or whatever, but we'd like to be in earlier when they're actually doing the initial toxicity studies. There, they tend to go for people that just deal with toxicity. You know, them kind of things that are, you know, 100% accretive to us, we're looking at [Quigg] so.
Okay, thanks a lot. I'll go back in line behind these other people.
Okay.
Just to circle back on the recurring revenue. Now that I actually have numbers in front of me, it's more comfortable to talk about it. Looking at the new operations that we had in this year in 2021, the aggregate of our two U.S. plants and with the Minto operation, it brought us more than CAD 1 million. Just north of CAD 1 million in revenue.
Yeah.
For this year, 2021, our Raglan-
2022.
2022, our water treatment for Raglan, it's a bit less than last year based on the demand that they need on site. With our new operations, we brought in a north of CAD 1 million compared to last year. Forecasting into Q4, that's gonna be with Minto and our other operations keep going, you're looking at like CAD 1.3 million, CAD 1.4 million, and that's the new revenue that will continue on into 2023 next year, this CAD 1.4 million.
It's still. That's new revenue, but we're still talking 30% of overall.
Exactly. Yeah.
Yeah.
Yeah.
[Quigg]'s question was percentage, so yeah. You know, the aim for all shareholders out there is that that number continues to increase. 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. 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 re-recurring revenue. That may be two years, three years down the road, but that is the ultimate aim on all the projects we're in today.
Speaking about new recurring revenue for next year, 2023, we already have two plants that we will be starting up next year and potentially a third one as well.
Sure.
Yeah.
We, not unnecessarily. I think if anyone spoke to us 18 months ago or whatever, you know, we was at a run rate of 1 plant a year. We would get to 2 plants a year and a long way off was 3 plants a year. Well, you know, we're at a run rate of 2 a year now of recurring revenue and, as Heman said, it may even be 3 next year, which is even ahead of our schedule so.
Thank you.
Absolutely. Thank you for the question.
For others on the call, feel free... Maybe you can raise up your hand first. I'll call out your name, and then you can unmute and continue on with your question, so we just don't have a traffic jam.
Yep. Yeah, well, yeah, that's a good idea, Heman. If you just raise your hand if you have any questions or there's certainly enough of you there, so. 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 unmute and ask your question.
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 of this size and for the potential and the growth that we're seeing, the share price is undervalued considerably. 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. Let's just say seriously considering. I, you know, I, we have to be realistic to where we are in liquidity and how much we may actually get. I do believe that at least we will be able to tell the market that we think we're massively undervalued. you know, it, there's always an argument for saying, "Well, you'll cause less liquidity." The reality is there is none at the moment anyway. you know, David, I, and Heman have done a hell of a lot of going out there, trying to sit in front of family offices, trying to talk to investor groups and whatever.
It's, you know, it seems at the moment that at least it will be a good use, a great use of funds, but also a good message to market that we actually believe in where we're at. It is, William, a very serious consideration, and I, you know, obviously, I'm not gonna give you any non-public information, but I will say it's a very serious one of the options. Yeah.
You can't put a date on that yet?
I can't because I would be giving you non-public information, unfortunately. I'll just leave it at that. I just don't wanna put anyone in a terrible situation.
Sure. That makes sense. Thanks for your comments.
Absolutely. There was someone else up there, Heman. Yeah.
Yeah. There's also Jim.
Yes. I'd like to know if, the, turmoil going on in China, is there gonna be a problem going forward of like repatriating the cash you generate there out of China and into your hand?
We've had, Jim, we've. This is a conversation we constantly have, and it's a worry. That earlier question that [Quigg] asked about the percentage of recurring revenue has always been so high in China that it's worried the life out of us should something happen. Because we, you know, 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-owned, you know, 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.
Should the Chinese government decide not to repatriate, you know, 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 pulled the money in as soon as possible because there was a lot of talk going on about exactly this issue. 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 do have, one would hope it's not forever, and we do have other operations out there where we could at least use them funds. 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 gonna refuse to do the business out there that's been really good to us.
Yeah. Just to add on, like [Quigg] pointed out, is that we can't control what we can't control. On the flip side, you know, just wanna remind everyone, you know, for the every year, we get the dividends back every year. 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.
Yeah.
We have a great relationship with our partner. In terms of the secondary option that Peter mentioned about, we do have a wholly owned subsidiary in China that we're using that to operate our SART plants in China. There's other methods to redirect money. May not be in Canada, but, you know, it's not like we... It can get redirected to our subsidiary in China.
Yeah. That's actually an important question 'cause. Or an important answer. When David and I stepped in, Jim, one of the things was we was absolutely gonna de-risk the use of cash by the old company, i.e. BioteQ, which we did. One of them, you know, going into the SART plants, we did. In fact one of them was the first 1 that we proved we didn't have to put up money to actually gain a percentage of the entity. We have outside financers finance our projects in China at the moment, and that's that joint venture payment it's talking about. I'm certainly not saying we are gonna do this, but that would be an option that we could actually finance more and have more wholly owned SART plants out there. Possibility. I'm just thinking on my feet, Jim.
So.
Thank you.
Absolutely. Thank you for the question. I see [Quigg]'s hand. Is that raised again?
Yes.
Yeah.
That's the second time, so go ahead, [Quigg].
Yeah, please.
Yeah, 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 Globe and Mail this morning reported on business. They're all huge numbers. I mean, like, you know, CAD 4.7 billion for this giant mine to reclaim it and things like that. Are we likely to benefit from this, or is this gonna be all going to the huge companies that can take down the whole, the whole job on their own?
Well, it's interesting because, you know, a few years ago, people wouldn't have looked at us 'cause they said, "Oh, look, their balance sheet." Now nobody mentions our balance sheet. We're actually getting in these larger conversations, [Quigg]. I'm not saying we're gonna win them. I certainly don't wanna make any false promises to our shareholders. We've actually been asked to present to so many, certainly, federally to the Canadian government and provincially to the B.C. government on selenium regulations. In fact, in the draft report on coal mining that the federal government brought out, if anybody is interested in reading 590 pages, very unusual for a government agency that the only process they actually mentioned was ours. You know, that old, you know, punching above our weight.
We are in the conversations. Now, that said, you know, sometimes the much larger boys can put up, you know, monstrous amounts of capital to build these gigantic plants. We eventually had one of them talk to us recently about, you know, working alongside them, i.e., they put up the capital. It's very, very early stages, and these things get talked about forever. We're having some conversations. Whether it happens or not, we'll certainly let you know if it does. It's I'd like to say, you know, for such a small company to even be in these conversations is refreshing for us, [Quigg].
Refreshing for your shareholders as well. Thank you very much.
Absolutely. Yeah. Anyone else out there?
I see no more questions.
Okay, guys. If you have any questions, please, that's what we're here for. Also understand, you know.
I think Jim put up his hand again. Go ahead, Jim.
Yes. I have another question about, you had one project in which you were working with a utility involving coal ash.
Yeah.
Any other projects in that area? That seems like a huge, you know, possibility of added business.
It is. I heard on NPR one day that they described it as the largest environmental liability issue in the U.S. All these ash ponds sitting out there. We are getting other inquiries, Jim. Nothing concrete yet, but we're getting other inquiries and from power stations as well in other respects, i.e., flue gas and that. It's interesting. Certainly our laboratory is working on other water for these people. We are getting some inquiries in this area, but nothing concrete yet, Jim.
Thank you.
It's actually, to add to that, it's an interesting area for us because certainly these U.S. utilities are gonna have to spend a lot of money cleaning up these ash ponds. We're doing that. Any other questions? No? Hearing none. Well, you know, guys, we'll, you know, as both 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. You know, the very nice thing that the Minto mine is a new operation for us that we've spent no time building up to.
We're certainly gonna look at can we get into more operations like that on a very short sales cycle. We look forward to giving you the end of year figures in early 2023.
Around, yeah, mid to late April.
Yeah.
You can expect the year-end results, the audit results.
Yeah. Not early, I apologize in doing that. Thank you all for your support. We're gonna 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 wanna 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. With that... No other questions, Heman?
No.
No. Okay. Thank you for your participation.
All right.
Thank you very much.
Thank you, everyone, for joining.