BluMetric Environmental Inc. (BLM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the BluMetric Environmental Inc. Fiscal Year 2023 Q2 Conference Call. [Operator Instructions] This call is being recorded on Friday May 26, 2023, and I would now like to turn the conference over to Vivian Karaiskos. Please go ahead.

Thank you, operator. Good morning, and welcome, everyone, to BluMetric Environmental's Quarterly Earnings Conference Call. This call will cover BluMetric's financial and operating results for the fiscal second quarter ended March 31, 2023. Following our prepared remarks, we will open the conference call to a question-and-answer session. Our call today will be led by Scott MacFabe , BluMetric's Chief Executive Officer, along with myself, Vivian Karaiskos, the company's Chief Financial Officer. 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. A -- The company's actual results may differ significantly from those 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 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 the call over to Scott MacFabe. Please go ahead, Scott.

Good morning, everyone, and welcome to our second quarter 2023 earnings call for BluMetric Environmental. We appreciate you taking the time to join us today on our call. First, I always like to start off by acknowledging the continued hard work of our talented and diverse team puts in -- they're the ones that allow us to successfully deliver solutions to our clients more complicated environmental and business challenges. At the same time, we really appreciate the continued support from you, our shareholders, I would like to thank you for your continued support and confidence in BluMetric Environmental. After my overview, the second quarter our CFO, Vivian Karaiskos, will go over our financial results in more detail. We continued into the year showcasing the stability of our business while we continued making meaningful progress and investments into our growth strategy. This was shown with revenues remaining relatively consistent with comparable quarters. In addition, we made a priority to continue to hire essential personnel throughout the quarter to support our project execution and sales force. Most notably, I'm excited to announce a 3-year $11.7 million contract that we have just signed with Rheunmetall. We've been talking about our Water Clean Tech strategy for quite some time now, and this contract showcases this strategy. The scope of the contract is to develop and deliver small portable water purification systems as part of a contract awarded by the Canadian Armed Forces. These units and the advanced subunit water purification system, or ASUWPS, will significantly enhance the Canadian Armed Forces mission to support capabilities by enabling water purification at the subunit level. In preparation for this contract and future prospects, we've made investments in expanding our production facility and developing a prototype. Overall, we're seeing the benefits from the diversity of our solutions and markets. Revenues in the commercial and government markets remained relatively consistent compared with revenues from the same quarter last year. Revenue from the mining market witnessed an approximately 50% increase for both the quarter and year-to-date when compared to similar periods in the year prior. This growth was primarily driven by a contract for a water treatment system at a mine site. On the other hand, revenue from the military market decreased due to completion of contracts and a longer sales and procurement cycle required for new contracts in this market. Second quarter 2023 revenue came in at $7.4 million, a slight decrease of 10% compared to Q2 2022, smaller top line reflects the project mix, which included smaller contracts this quarter. The beta decreased to 317, 000 and -- which would decrease from about 32% from Q2 2022. At this point, we see the current gross margin levels stabilizing and are working to increase them as we get more operating leverage from the investments into growth that we're completing. As I mentioned in the last update, operating costs were expected to increase due to increased activity strategic investments in sales, marketing and technology. Our balance sheet remains healthy and strong as demonstrated by our net cash position, and we remain confident that our capital stewardship priorities will deliver sustainable growth resulting in shareholder value over the long term. Gross profit was $1.5 million with gross margin was in line at 21% in the first quarter compared to $1.8 million and 22% for Q2, 2022. Gross margin was down slightly this quarter due to project mix. As we enter the field work season, the metric will continue to build upon a success servicing clients in Canada is [ north ] during fiscal year 2023. Additionally, we will leverage our Innovate owned joint venture to support projects based in [ Nunavut ]. Lastly, I'd like to welcome the boost members of our team, which includes strategic hires and business development roles for our commercial, industrial and military markets. These additions are key for driving growth in these markets. Ultimately, BluMetric takes a highly disciplined approach to identifying opportunities that we believe will accelerate growth over the long term. We continue to prioritize business development efforts in all key markets with a long-term focus on key investments in clean tech water treatment solutions. In particular, we'll be showcasing our mobile water treatment systems in August -- in August at CFB Suffield in Alberta. I'd now like to hand this back over to Vivian for an overview of the financials. Please go ahead, Vivian.

Thank you, Scott. I'm pleased to present to you today BluMetric's second quarter results in more detail. As Scott mentioned, BluMetric had quarterly revenue of $7.4 million, with gross profit representing $1.5 million for gross margin of approximately 21%. The company's EBITDA was $317,000 with net earnings of $80,000 or $0.00 per share. Year-over-year, we experienced a slight decrease in overall revenue, mainly due to project mix. The company's results for the 6 months ended March 31, 2023, were in line with internal expectations. On March 31, 2023, BluMetric had a cash and cash equivalent balance of $3.4 million, a decrease of $700,000 from the previous quarter end. The company remains well financed to achieve its objectives and maintain a clean capital structure with minimal debt. Cash used in operating activities was approximately $979,000 in the 6 months ended March 31, 2023, compared with cash produced from operating activities of $55,000 for the same period in 2022. The decrease in cash flow is due mainly to increased payments required in large part to secure the timely supplies materials for our price. There were no other -- there were no investing activities in the 6 months ended March 31, 2023, compared to cash consumed by investing activities of $61,000 in the same period for 2022. For the 6 months ended March 31, 2023, cash used in financing activities was $504,000, compared to cash used in financing activities of $469,000 in the same period for 2022. As at March 31, 2023, the company had approximately $6.1 million in availability between its operating line and cash balances and was in compliance with all its covenants. We will report our fiscal Q3 2023 results in August 2023. I would like to thank you for taking the time to allow us to present our results to you today. We will now take questions from call participants.

[Operator Instructions] As there are no questions on the line. This does conclude your conference call for today. We thank you for participating, and we ask that you please disconnect your lines. Enjoy the rest of your day.