BQE: Decent Q1 Financials; Recurring Revenue Up 114% YoY
What you need to know:• BQE reported Q1 financial results yesterday where the highlight was 114% YoY growth in its recurring operation services segment.
• Technical services revenue was weak however, leading to a slight miss on proportional revenue ($3.4M vs. $3.8M expected) and margins.
• Management’s outlook remained bullish, expecting operation services revenue continuing to grow rapidly and technical services revenue catch back up in H2.
BQE Water (BQE:TSXV, BTQNF:OTC) reported Q1 financial results yesterday after market close that included a more than doubling of operation services revenue (recurring). Technical services revenue was soft in the quarter, leading to a miss on our expectations; however, management expects this segment to pick up in H2. The China JVs also performed well, taking advantage of the higher copper prices. We remind readers that Q1 is seasonally weak for BQE. We remain highly confident in our investment thesis on BQE which was laid out in our initiation report (read here). We are maintaining our BUY rating and target price of $71.00/share on BQE Water.
Key Highlights
• Proportional revenue came in at $3.4M (-4% YoY) compared to our estimate of $3.8M. This was comprised of operation services revenue of $1.8M (+114% YoY, 52% of revenue), technical services revenue of $0.7M (-61% YoY), and BQE’s share of JV revenue of $0.9M (+4% YoY).
• Gross margin of 44% vs. our expectation of 40% and 37% in Q1/23 (note that this is reported as operating margin before depreciation).
• Adjusted EBITDA of ($0.1M) vs. our estimate of $0.6M and ($0.1M) in Q1/23. The negative margins were due to the miss on technical services revenue as resources were allocated to sales and marketing rather than direct operating expenses.
• BQE’s share of JV net income was $0.3M compared to our estimate of $0.2M and $0.1M last year. This includes a 35% increase in revenue from the JCC-BQE JV.
• Net income of ($0.5M) vs. our estimate of $0.3M and ($0.3M) in Q1/23.
• BQE ended the quarter with $8.2M in cash, generating $0.3M in OCF.
BQE Water is engaged in the acquisition and development of processes to treat metal-laden, sulphate-rich waste water streams for acid neutralization and metal recovery. The principal operations of Co. are to build process plants and earn revenues from recovered metals, treatment fees, plant sales and process licenses.
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