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BQE: Expanded Service Offering to Support Growth Strategy

What you need to know:
• BQE announced a strategic expansion of its service offering into aquatic toxicology. This includes key hiring decisions, the establishment of a new laboratory, and the development of in-house resources.
• The added services will allow BQE to build relationships with new clients, which will also require water treatment services (recurring revenue).
• BQE will be reporting Q2 financials at month end. We are expecting proportional revenue of $7.2M (+19% YoY) and adjusted EBITDA of $2.2M (30% margin, +64% YoY).

Yesterday after market close, BQE Water (BQE:TSXV, BTQNF:OTC) announced that it is making a strategic investment into the integration of aquatic toxicology services into its existing suite of core competencies. This involves key hiring decisions, the establishment of an aquatic toxicology laboratory, and the development of in-house resources. We view the announcement as a strong positive, given that it will open the doors to new clients and projects which can eventually become operations services clients. We are maintaining our BUY rating and $80.00/share target price on BQE Water.

The expansion is underpinned by a team of senior aquatic toxicologists, including James Elphick, Dr. Ebrahim (Ebi) Lari, and Josh Baker. James Elphick has spent 30 years performing applied research and testing to advance the science of aquatic toxicology and help clients gain an understanding of the causes of toxicity and the interaction of toxicants with water quality conditions.

The investment will improve BQE’s service offering by 1) reducing timelines and costs associated with implementing remedies to toxicity by having an in-house multidisciplinary team to perform all testing and design remedies, 2) consider establishment of science-based site-specific water quality benchmarks holistically, and 3) uniquely position the Company to provide guarantees to clients for effluent toxicity as part of plant operations services. The services are not only complementary to the existing technical services but also offer potential for accelerated growth in the water treatment business via new relationships. The laboratory is expected to be fully accredited, but also support the water treatment business and focus on investigative work rather than processing samples.