Earnings call transcript: BluMetric Environmental Q3 2025 sees revenue surge

BluMetric Environmental Inc. reported its third-quarter earnings for 2025, revealing a significant increase in revenue but a net loss compared to the previous year. According to InvestingPro data, the company has achieved impressive revenue growth of 63.5% over the last twelve months. Despite this growth, the company’s stock saw a decline, reflecting investor concerns over profitability metrics. The stock price dropped by 5.93% following the announcement, closing at $1.27, down from its previous close of $1.35. InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued.

Key Takeaways

• BluMetric’s Q3 revenue rose to $14.7 million from $8 million the previous year.
• The company reported a net loss of $451,000, compared to net earnings of $27,000 last year.
• Gross margin declined to 36% from 44% year-over-year.
• Stock price decreased by 5.93% post-earnings announcement.

Company Performance

BluMetric Environmental showcased a robust increase in revenue for Q3 2025, driven by new contracts and product launches, particularly in the military sector. However, the company faced challenges with declining gross margins and a net loss, which overshadowed the revenue gains. The performance reflects a mixed picture, with significant growth in certain areas but profitability pressures remaining a concern.

Financial Highlights

• Revenue: $14.7 million, up from $8 million in the same quarter last year.
• Gross Margin: 36%, down from 44% year-over-year.
• EBITDA: $308,000, compared to $356,000 the previous year.
• Net Loss: $451,000, versus net earnings of $27,000 last year.
• Net Cash Balance: Improved to $3.4 million from a net debt of $157,000 last year.

Earnings vs. Forecast

BluMetric reported an earnings per share (EPS) of -$0.01, missing expectations. The negative EPS reflects ongoing challenges in managing costs and achieving profitability despite increased revenues.

Market Reaction

Following the earnings release, BluMetric’s stock fell by 5.93%, closing at $1.27. This decline positions the stock closer to its 52-week low of $0.54, indicating investor concerns over the company’s profitability and future outlook despite its revenue growth.

Outlook & Guidance

Looking ahead, BluMetric is targeting a 10% EBITDA margin at $100 million in revenue. The company is exploring potential acquisitions and focusing on geographic expansion to drive future growth. The outlook remains cautiously optimistic, with expectations of a 6-7% EBITDA margin in Q4.

Executive Commentary

CEO Scott McPhave emphasized the company’s commitment to creating a better environment for business, highlighting the importance of their innovative solutions in addressing environmental concerns. CFO Dan Hilton noted the increasing scarcity of water and the growing demand for BluMetric’s expertise in water technology.

Risks and Challenges

• Declining gross margins pose a risk to profitability.
• Market saturation in certain sectors could limit growth.
• Macroeconomic pressures and potential supply chain disruptions may impact operations.
• Competition in the environmental solutions market remains intense.

Q&A

During the earnings call, analysts questioned the company’s M&A strategy and its focus on maintaining a professional services team. The potential for naval water system technology in commercial markets was also discussed, highlighting opportunities for future growth.

By focusing on its strengths in environmental solutions and water technology, BluMetric aims to navigate the challenges ahead and capitalize on emerging opportunities in various markets.

Full transcript - BluMetric Environmental Inc (BLM) Q3 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the BlueMetric Environmental Inc. Fiscal Year twenty twenty five Q3 Conference Call. At this time, note that all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Also note that this call is being recorded on Thursday, 08/28/2025.

I would now turn the call over to Brandon Chow. Please go ahead.

Brandon Chow, Unspecified, BlueMetric Environmental: Thank you, operator. Welcome, everyone, to BlueMetrix Environmental’s quarterly earnings conference call. This call will cover BlueMetrix financial and operating results for the twenty twenty five third fiscal quarter ended 06/30/2025. Following our prepared remarks, we will open the conference call to a Q and A session. Our call today will be led by Scott McPhave, Bloometrix’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 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 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 the call over to Scott McPhee. Please go ahead, Scott.

Scott McPhave, CEO, BlueMetric Environmental: Thank you, Brandon, for the introduction. Welcome everybody to our third quarter twenty twenty five earnings call for BlueMetric Environmental. We appreciate all of you for taking the time to join us on today’s conference call. And as per usual, I’ll start off by providing an overview of the quarter and Dan will go over our financial results in more detail. Firstly, we’d like to start off by giving those who are new to our story a reminder of what we do at BlueMetric.

We create a better environment for business. What does that mean? Well, BlueMetric is a full service water technology and environmental engineering firm. We design, fabricate and deliver sustainable solutions to complex water and environmental challenges and have a rich history that spans over fifty years. We have evolved into a specialized integrator of environmental solutions in the fields of water and wastewater treatment and professional environmental services for the natural environment.

We aspire to be the environmental solutions and water tech company of choice globally. Now let’s discuss this quarter in more detail. The quarter saw another significant increase in revenues due primarily to the addition and post acquisition organic growth of Gemini, also known as WaterTech USA. I would like to point out that the organic growth of the acquisition has been strong post acquisition, and we are very happy with the results so far attributable to the investments that we have made in people, sales and production facilities. These operational results for WaterTech USA wouldn’t have been possible if it wasn’t for the previous investments we’ve made over the last couple of quarters.

Since acquiring Gemini almost a year ago, we’ve had more than doubled their revenues and have put into place a strong foundation to continue their run rate, which also is building a base of recurring revenues with operation and maintenance or O and M. As evidenced with recent announcements, we see strong demand for fixed base decel systems in The Caribbean region. This continues to be producing other opportunities that emerge with wastewater treatment as well, particularly in regions like Texas. We have our eyes set out on not only growing our customer footprint in The Caribbean, but also in other geographies like the Southern U. S.

This quarter, we also saw a 76% increase in revenues for our military market as we started production of our A Swaps unit. It’s a contract that we’re executing with Ryan Mattel Canada along with other existing military contracts on board. The work is going well so far. We feel that this market is due for more significant growth. We believe that this is the case because the recent commitments from the Canadian federal government for military spending and the urgency behind it.

As you know, over the last couple of years, we’ve invested into the team, particularly for sales and marketing to grow this market in Canada and abroad. We continue to be patient with securing contracts for the military market given the longer sales cycles. Subsequent to the quarter, we announced the first of its kind $3,800,000 contract with Thales Canada to help improve the water quality and extend the life of the distribution systems on Canadian Navy ships. It’s these kind of initiatives that showcase our technologies and client centric approach to launching new products for our customers. For our military market, we continue to believe that our success will hinge on our continued ability to form key relationships within the main target markets in Canada, Europe and The United States.

A milestone I would like to see is a contract with another NATO country besides Canada, validating that we can sell and execute internationally. Similar to last quarter in professional services, we saw the tail end of project delays due to the transition in Canadian federal government, Ontario provincial government and market uncertainty stemming from The U. S. Trade uncertainties. This continued to have the most impact on our government market, which remains 10% behind in revenues year over year.

And we also saw weakness in the commercial industrial market for professional services. In addition, our mining market saw some weakness due to general slowdown, but we are now seeing this start to pick up significantly. The combination of delays in projects, along with a higher personnel base to support higher revenues, created an increase in non billable labor and consequently lower utilization, lessening our profitability in the segment. We originally thought this improved towards the end of Q2, but it was only until the end of Q3 where we started to see the full rebound start. As a reminder, we completed significant reorganization of the team in this segment in the previous fiscal quarter and expect the benefits of these changes will come through in due time.

As we look forward, Q4 and Q1 are usually our seasonally strongest quarters professional services, and we will aim to take advantage of that. We’re also assessing potential acquisitions in professional services, which we believe align with and strengthen our sales, operations and offerings. There’s a potential to take advantage of the weakness in certain markets and geographies where we can get a more favorable price for new assets. Furthermore, EBITDA for the quarter was down slightly mainly due to lower utilization of our professional services. As I mentioned, we’re getting the segment back on track, which will help improve the bottom line.

Ultimately, our success in the coming quarters will hinge on the successful execution and delivery of our WaterTech projects and improving the growth and profitability of professional services. In conclusion, this year is shaping up to be a strong year as we saw the benefits of our investments alongside execution and excellence in sales, business development and manufacturing. We want to set ourselves up for success in the coming fiscal year, which means making the right moves now and planning ahead as we always have. We’re a unique company with unique water technologies, and this combination with talented and committed people creates a flywheel for us to become a larger and more dominant player in our markets. I’d now like to hand it over to Dan for a more detailed overview of the financials.

Please go ahead, Dan.

Dan Hilton, CFO, BlueMetric Environmental: Thank you, Scott. Today, I’ll be presenting BlueMetrics’ twenty twenty five fiscal third quarter results in more detail. Revenue for the third fiscal quarter was $14,700,000 compared to $8,000,000 in the prior year. As Scott mentioned, the revenues increased primarily due to the rapid growth of WaterTechUSA, which continues to surpass our expectations. We acquired this business with approximately US7 million dollars in trailing revenues and have since grown it to a run rate that has more than doubled when annualized.

This would not have been possible without the investment in additional and improved manufacturing space along with new hires. This showcases how we continue to make investments in the underlying business, which we expect to pay off later, as sales continue to grow and new O and M contracts are negotiated with long standing clients. Across the company’s key markets for the fiscal quarter, the commercial and industrial markets revenue increased year over year mainly due to Watertight USA. The government market saw a modest increase due to delays on projects from the prior quarter. The military market increased mainly due to the Rhinmetall Canada production, which has started alongside with other existing military contracts.

We expect to see production of the A swap systems with Rhinmetall Canada continue for approximately the next five quarters. Lastly, the mining market decreased due to general sector slowdown. However, as Scott mentioned, we are now starting to see the mining sector pick up again with many of our clients requesting proposals. We generally expect to see fluctuations in our core markets as we continue executing and some will make up for others depending on the quarter. Having a strong presence in our core markets helps to manage these natural fluctuations.

Utilization is improving as we see fieldwork and contract awards picking up. Our gross margin was 36% for the fiscal quarter compared to 44% in the prior year. The decrease in gross margin is attributable to the change in sales mix where there has been a material increase in the relative sales of watertack over professional services during the period. Operating expenses for the fiscal quarter came in at $5,600,000 compared to $3,400,000 in the prior year. The increase is due to the operating expenses attributable to Gemini, which are proportionately lower than the associated revenue growth, resulting in economies of scale.

There is also a $900,000 increase in non billable labor within the professional services segment compared to the same period in 2023. This is influenced by the natural timing of contracts in a delayed market linked to macroeconomic factors following recent government changes in Canada and market uncertainties. We have demonstrated our commitment to our world class team by continuing to retain and support staff in anticipation of future growth in professional services in Q4 and beyond as market conditions and government procurement improve. EBITDA for the fiscal quarter decreased slightly to $308,000 compared to $356,000 for the prior year. The decrease in EBITDA is mainly due to investments along with the deterioration in utilization for our professional services.

This was offset by the operating leverage received from Gemini. As of the end of the fiscal Q3, we have seen a turnaround in the market activity, which we expect to improve and we’ll see those results in our utilization in Q4. A net loss of $451,000 was reported for the fiscal quarter compared to net earnings of $27,000 in the prior year. On 06/30/2025, BlueMetric had a net cash balance of $3,400,000 compared to net debt of $157,000 a year ago. As at 06/30/2025, the company had approximately $7,400,000 in cash availability between its operating line and cash balances and was not bound by any debt covenants.

Overall, twenty twenty five has shaped up to be a transformative growth year for the company as we saw the benefits of our investments pay off. We still have work to do to continue our momentum in WaterTech Canada and in The United States, while we are solidifying the right economics and professional services by improving efficiencies, utilization and reducing seasonality through strategies to broaden our service lines and geographic reach. Our production capacities in Canada and The United States are progressing nicely and have been able to satisfy the higher run rate in WaterTech. Next calendar year, we expect to see the benefits of other investments like our new ERP system, which will allow for improved product management and load balancing. We are a world class environmental consulting and water technologies delivered by world class people who do meaningful work every day.

We continue to believe that 2025 is an inflection point for the business, water is ever scarcer and the environmental concerns of our clients continue to require our world class assistance. I’d like to thank everyone for taking the time to allow us to present our results to you today. And I’ll now hand it back over to Scott.

Scott McPhave, CEO, BlueMetric Environmental: Thank you, Dan. That was a great update. And echo the excitement surrounding the opportunities that lie in the year ahead. We’ll now take questions from call participants, and we’ll pass it back off to the operator.

Conference Operator: Thank you, You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by 2. And if you’re using a speakerphone, you will need to lift the handset first before pressing any keys. And your first question will be from Steve Kamermeier at Clair Securities. Please go ahead.

Steve Kamermeier, Analyst, Clair Securities: Good morning, guys. Good morning, Steve.

Steve, Analyst, Clair Securities: Hey, just curious about the margin improvement in Q4. Is there anything in particular you need to do? Or has the revenue already started to be generated from the Canadian government?

Dan Hilton, CFO, BlueMetric Environmental: Yes. Definitely, think, as you know, we’ve got an aspiration to achieve a 10% EBITDA at $100,000,000 top line, and that’s what we’re modeling towards. It’s challenging for sure with the delays in government contracts and some of the delays we saw in awards during the election period. We’re definitely seeing improvement both in mining and in government. Our utilization is at an all time high right now.

So if we can sustain that, obviously, that will drop to the bottom line. Our Q2 utilization was very low, one of the lowest we’ve seen in a long time as we maintained a strong staff confidence while we were waiting for a contract to be awarded. So I think to answer your question, we are seeing already signs of material improvement in EBITDA for Q4.

Steve, Analyst, Clair Securities: Okay. And as we sit today, mostly through fiscal Q4 here, when we look at year over year EBITDA margins, are we trending towards beating fiscal year 2024 and 2025 there?

Dan Hilton, CFO, BlueMetric Environmental: Yes. We believe by the end of 2025, we’ll have a stronger EBITDA than we did in 2024. That’s correct.

Steve Kamermeier, Analyst, Clair Securities: Okay. That’s actually all I had. Thanks, guys.

Dan Hilton, CFO, BlueMetric Environmental: Thanks, Steve. Thanks,

Conference Operator: Next question will be from Sebastian Krog at Treasure Hunting. Please go ahead.

Sebastian Krog, Analyst, Treasure Hunting: Hi guys. Thanks for taking my question. I just wanted to get maybe some more color on the increase in SG and A, one on the professional service side and then also on the WaterTech front. Maybe you could explain a bit more the rationale behind and where exactly you are investing currently?

Dan Hilton, CFO, BlueMetric Environmental: Yes, absolutely. So the I’ll talk to WaterTech first just because I think it’s a quicker and shorter explanation. When we acquired Gemini, we naturally picked up some additional overheads related to that business. However, the proportion of those overheads when compared to the revenue is significantly less than the balance of our business. So while there is an additional overhead complement from that acquisition, there are economies of scale, and we’re not seeing any material increase to overhead as a result of that transaction.

The single largest change in our overhead or SG and A year over year has been the reduction in utilization within the professional services team, as you mentioned. And so that’s why you’re seeing the increase in that segment. When our utilization is low, the unallocated costs associated with our employees fall to SG and A. So when our team is working hard, they’re out in the field billing our clients, we have an improvement in revenue and we have a decrease in SG and A. When things are slow and we’re waiting for contracts to be awarded, we have a reduction in revenue and an increase in SG and A.

So it’s a bit of a double whammy on the professional services side. And we saw the impact of that in Q3. And as I mentioned to Steve earlier, we’re now at a point in our cycle where utilization is extremely high, and so we expect that to flip in Q4.

Sebastian Krog, Analyst, Treasure Hunting: Perfect. That makes a lot of sense. Thank you.

Scott McPhave, CEO, BlueMetric Environmental: Hey, Sebastian, one last thing. This is Scott. Good to hear from you, by the way. As Dan mentioned, one of the more difficult decisions we have to make in management relative to professional services is, is it best in the long term to hold your team and execute well so that you can recover with a higher execution down the road when the contracts kick in. And they have.

But a quarter ago it was a very difficult decision to say we’re going to retain the team. You know, we’ve always said the secret sauce in this business are our people and we have to walk the talk. And if we just cut heads, it’s a very short term way to look at the business. It may produce some improvement in the numbers, but the long term impacts are quite negative. And then you eventually earn the unfortunate name that your company doesn’t have the maturity to be able to hold the teams together and execute well for the clients.

And so we took the approach that we saw this little dip in utilization as just delays, not contracts being quit. And when they lit up and they are lighting up now, we have the team ready to go and executing well. And at that, as Dan mentioned, that should reduce that SG and A and improve our production of revenue in Q4 like we need to. So we don’t want to be known as the hire and fire organization. I mean there are times when you have to do that.

But I think we made I believe strongly we made the right call, and we’re going to see the benefits of that call in Q4 and beyond.

Sebastian Krog, Analyst, Treasure Hunting: And so just to clarify, you kept your headcount stable on the professional service front. You didn’t increase or decrease it significantly.

Scott McPhave, CEO, BlueMetric Environmental: Is that correct? We made no increase in professional services. The only adds to our headcount were in water tech.

Sebastian Krog, Analyst, Treasure Hunting: Okay. Thank you very much.

Conference Operator: Thank you. Next question comes from Jordan Grant at Seaton Group. Please go ahead.

Jordan Grant, Analyst, Seaton Group: Hello, team. Nice to hear your presentation. Thank you. Just on the same point, I just want to hammer it home for the sake of other listeners. It’s sort of a little accounting quirk here in that those salaries and benefits, when the people are out billing, it flips up to cost of sales.

And when they’re unutilized, it’s flipping down to overhead costs. And it’s so it’s definitely not a permanent increase in overheads. It’s just because of that little accounting quirk. And could you just repeat again, please? You mentioned what that dollar figure was of unbilled revenue compared with the previous period compared to period?

Yes.

Dan Hilton, CFO, BlueMetric Environmental: Dollars 900,000 is what we carried in the quarter.

Jordan Grant, Analyst, Seaton Group: Yes. So it’s very and what was it in comparison with the previous period, though?

Dan Hilton, CFO, BlueMetric Environmental: Yes. So normally, we carry about $1,500,000 in unutilized labor per quarter. And so this was up at $2,400,000 for the quarter.

Jordan Grant, Analyst, Seaton Group: Okay. So $900,000 was the increase. So that’s very significant because just having been that had that been normal, then the bottom line would have gone up by that much. Actually, your revenue would have been higher as well in your gross margin. So not the gross margin, but the gross revenue.

Scott McPhave, CEO, BlueMetric Environmental: Jordan, I really appreciate you pointing this out because in many ways, these are the hard decisions that we have to make for the long game. And if we become we start making knee jerk reactions like the amateurs might, then we’re going to pay for it for the long term. Our reputation is going to be tarnished. And the kind of people we need to have here and bring to the organization that are going to produce the future for us are just not going to come or stay. And so it’s a tough one.

But you’re absolutely right. You know, when we see things moving to the side or to the right and we know that contracts are being canceled and we just have to bite the bullet, I am completely confident that we made the right decision, even making that kind of a decision does mask in many ways the results from other aspects of the operations that are doing very, very well.

Jordan Grant, Analyst, Seaton Group: All right. Now one is sort of on the strategic measure. You mentioned that you’re looking at possible acquisitions and possible growth in the professional services to try to balance that out. And so are you looking at different geographic markets and or additional services that you can offer to the same set of clients presumably?

Scott McPhave, CEO, BlueMetric Environmental: That’s a great question. The way we look at it and part of our strategy is there’s kind of three legs to the stool here, and we’ve got two of them covered. We’re well taken care of in the natural environment for water and environmental services. We’re well taken care of in terms of technology for water wastewater. But we’re not very well represented in the built environment.

And when I say that, we do have some services that play in there, like industrial hygiene services, IHS services, that very profitable. They’re not seasonally impacted. And so we look at that aspect of the business in the built environment where many partners hire us to do that kind of work. And so we have in our pipeline we have candidates that actually have approached us to say they’d like to be part of our enterprise. And we are constantly evaluating the benefit of that.

But we do see that there’s great synergistic benefits. There’s opportunities to improve our strength in geographies where we’re weak. And then the benefits of that, basically we look at an incubator model to say what would happen if what would the synergies be and what would be the overall benefits to all shareholders if they were part of us. And of course, all these candidates, they need to be no debt, And immediately accretive, so it’s nice to see. I think what’s starting to emerge here more and more is different businesses, different business enterprises are looking at us as a great place to be.

So we’ve got some business gravity in our M and A pipeline where compared to some of the bigger organizations, I think we’re a little more friendly and the more entrepreneurial organizations want to be part of something our size where they can continue to grow and exercise their abilities in more pleasant environment.

Jordan Grant, Analyst, Seaton Group: Thanks for that, Scott.

Scott McPhave, CEO, BlueMetric Environmental: Good to hear from you, Jordan.

Jordan Grant, Analyst, Seaton Group: Likewise.

Conference Operator: Next question will be from Jorge Jimenez. Please go ahead.

Jorge Jimenez, Analyst: Yes. Good morning, Scott and Dan. How are you guys?

Scott McPhave, CEO, BlueMetric Environmental: Hey, Jorge. Good to hear from you.

Jorge Jimenez, Analyst: Want to talk a little bit about the utilization. Sorry to keep hammering the point, but I think you called out $900,000 As you called seasonally very high utility into Q4, we’ve got visibility in July and August. So do you think you can hit a 10% margin, EBITDA margin for the quarter? Is that kind of I think you mentioned that’s one of your targets. Is that something you can do for the quarter specifically?

Dan Hilton, CFO, BlueMetric Environmental: I don’t think, to be honest, George, I think that would be I think we’re hoping to get somewhere north of 6% for the quarter, maybe close to 7%. I think 10% is an aspirational target that we have at $100,000,000 revenue. There are still other overheads that we carry as a small public company that sort of get absorbed through economies of scale as our revenues get bigger. So I think it would be aggressive for us to suggest to the market we would hit a 10% EBITDA, but we should see significant improvement.

And you can see the scales of the numbers that we’re talking about, 900,000 measured against our revenue is material. But I’d be shocked if we got close to 10%. I think we’re more likely in the 6% to 7% range.

Jorge Jimenez, Analyst: Okay. So it’s fair to say that we should have an improvement from seasonality into Q4, that 900,000,000 should kind of disappear

Dan Hilton, CFO, BlueMetric Environmental: Correct. In Yes, agreed. Okay.

Jorge Jimenez, Analyst: And can we talk a little bit about M and A, just a follow-up, like maybe a bit more in terms of where you see the pipeline, where you see opportunities, willingness for sellers and what kind of multiples should we expect and you guys to pay for these acquisitions and the amount of leverage you’re comfortable putting on the business to acquire these targets?

Scott McPhave, CEO, BlueMetric Environmental: I’ll start and I’ll let Dan finish. We’ve always said that we’re building a nice pipeline with quality candidates. We don’t rush it. This year, we’ve actually gone down the path with at least one potential candidate that at the end of the day we had to walk away from because it just didn’t play out. The numbers just did not come across with current performance the way they were represented.

And so we had to walk away, which is disappointing, but it’s necessary. Other targets, obviously, we can’t talk about. Forward looking statements like that, we’re very cautious about. But at the same time, I can say that we part of our investments when we’re doing this kind of an assessment really come down to a very deep dive and a large investment understanding the details of any enterprise we’re looking at. I mean a perfect example for quality of earnings assessment with an external would be $100,000 just on its own, dollars 80,000 to $100,000 And we’re absolutely spending that money because we know it’s money well spent to make sure that we have the details and confidence if we go forward with any of these decisions, number one.

Number two, as we get closer to closing on one of these candidates,

Jorge Jimenez, Analyst: by

Scott McPhave, CEO, BlueMetric Environmental: that time, we’re very confident that it will be an immediately accretive asset. It’s going to bring cash to the table. It’s going to bring great people to the enterprise. It’s going to add to our roster in terms of skills and geography. But then most importantly it’s the incubator aspect of it as to what two organizations can do together to produce a great outcome.

So Dan and I work on that a lot. Again, you don’t hear us closing on something this year, don’t be disappointed because have to I hope you have the confidence that we’re making the right decisions not just to jump to try and impress the market with a bump in our business that isn’t going to produce long term benefit. So that’s kind of where we’re at. Dan and I do spend a lot of our time on this and it is a key aspect of it. But I think the last question or aspect was what are we willing to do in terms of taking on risk and debt.

This is my eighth year at BlueMetric and I spent a lot of time with the team where we have an absolutely clean balance sheet. We currently have no debt. We currently have cash. We currently have a line. We have a lot of interest in investing in us.

And I think that’s for good reason. So when we make a decision to pursue an enterprise, I think we have the sophistication and the experience to not overpay and to make sure that we’re bringing something in that’s going to be beneficial for short and long term for all of our shareholders. And so Dan, I’ll pass it over to you for further details.

Dan Hilton, CFO, BlueMetric Environmental: Yes. I mean, I think that was a pretty comprehensive response. I’d suggest that the companies that we’re actively engaged with at the moment in our pipeline, just to give you a sense, are in the four to six times EBITDA range, as sort of a rule of thumb, is what I would throw out. We do believe in all cases that they’d be accretive to the organization. And one of the key things that we look for, apart from fit and culture and those things, is the ability for us to spark some level of organic growth within that enterprise.

So we’re looking for opportunities where there’s companies that can leverage their partnership with us and really the measure of success of the organic growth after the fact. And so that’s one of the key things that we’re looking for. In terms of how we’ll finance these, I mean, we’re very cognizant of the share price. We have to make an assessment obviously of the value that the market is placing on us with respect to whether there’s any opportunity to look at a raise of some sort. Certainly, as Scott mentioned, we’re averse to debt, but debt is an option.

Certainly, if the share price is not ideal, there’s an opportunity to take a little bit of debt. But we’ll never put ourselves in a situation where our debt obligations are dictating how we run our business. I think we’ve been through that and we’re past that now. And so the timing of some of these transactions will surely depend on the value that the market places on us and how we feel the cycle is so that we can make the most and leverage the new companies that are joining us. And we want to make sure that we’re going to be obviously to the benefit of all shareholders.

And we want the timing of the transaction to work out very well for the target as well. That’s important so that they stay motivated and excited about seeing growth and feeling something organic after the fact.

Jorge Jimenez, Analyst: Just one last one for me. I think you mentioned the naval markets for an acquisition. I was a little bit surprised by or curious by the Are there parts outside? I’m just wondering the rationale for maybe going into new markets as opposed to adding capacity in our existing markets, extracting more synergies perhaps in our existing markets? And that sort of thing.

So just maybe rationale there.

Steve, Analyst, Clair Securities: Yes. Sorry, George. I just want

Dan Hilton, CFO, BlueMetric Environmental: to make sure we understood the question. You were asking about was it the naval market? Is that what you suggested?

Jorge Jimenez, Analyst: I think I heard you say NATO, NATO, like other markets outside of North America.

Dan Hilton, CFO, BlueMetric Environmental: So I was just wondering if you could grasp The comment about NATO had to do with sales growth opportunities. So we currently sell to the Canadian military. A large client of ours. We have a fantastic relationship.

And over the last several years, that team has been able to inventory all of our parts that we sell to the Canadian military in the NATO catalog. And so we are a valid source of water technology to other NATO countries. And so the comment we made earlier was about sales opportunities outside of Canada into our NATO partners, not an acquisition opportunity.

Steve Kamermeier, Analyst, Clair Securities: Understood. Thanks for the clarification. Thank you.

Conference Operator: Next question will be from Ian Cassel at IFCM. Please go ahead.

Jorge Jimenez, Analyst: Yes. My question is about the contract you announced on August 12. I believe that was a new product. I was wondering if you could just give some color on that new product and what the total kind of market opportunity is for that?

Scott McPhave, CEO, BlueMetric Environmental: Morning, Ann. Good to hear from you. Great question. Anyone who’s seen any of our presentations, part of our business model, we often say that we don’t have an R and D budget, but we have a flywheel with our clients where we’re constantly working with them very closely to understand their problems and then to modify, adjust or develop new solutions for them as needed. In this particular case, Thales is a huge military contractor, much like Ryan Mattel.

I think they’re based in France. They have a strong position in Canada. And they’ve hired us to support them on various aspects of Royal Canadian Navy and other aspects of the military. But part of that was to come to us and say, we have some curiosities we need to resolve relative to water quality in our ship based systems. Is there anything you can do to help us with that?

So we did a very quick look at what the issues were. They’re confidential. It’s all part of their designs that they have in their systems, their ship based systems. And we produced a system that is basically a bolt on system that will work with and amend the water quality to improve water quality but also to extend the life of the infrastructure through which it’s conveyed. And so beyond talking more about it, what I can say is we thought that it was going to be a one or two off opportunity through Talos with the Navy.

And at the end of the day they gave us the entire contract to start right away because they really see the benefit of deploying this on a broad scale. So that is underway and it’s being tested.

Dan Hilton, CFO, BlueMetric Environmental: I would add as well that although this was a product that was built specifically for the Canadian Navy, we retain the rights to the IP and we do believe there is a broad application throughout all commercial shipping. So once the Navy units are in place, it’s been tested and deployed for a few months. We’ll probably have some learnings from it. But our expectation is that we’ll be able to take this investment and market the exact same product to large, whether it’s cruise ships or other commercial types of large ships, the solution really is not limited to a Navy application. It is any shipboard water system that has enough scale that it justifies extending the life of that infrastructure, the life of the pipes, that sort of thing versus tear out, which is quite expensive.

So broader application, absolutely. We retain the IP. But I think we’ll start to see the benefits of those in maybe one to two years down the road. We’ll get the Navy application fully functional first. Thank you.

Appreciate it.

Conference Operator: Thank you. And at this time, Mr. McFabe, it appears we have no other questions registered. Please proceed.

Scott McPhave, CEO, BlueMetric Environmental: Thank you, operator. In closing, of course, I’d love to thank everybody for joining the call. I appreciate the investment in BlueMetric, all shareholders. I hope you know that we’re working very hard to run a business or an enterprise here to address both top and bottom line growth. I’m very we’re very pleased with how the year has gone so far.

We certainly are not beyond our challenges, but do know that we have a very seasoned team working on all of it and we’ll execute well through the rest of the fiscal year. And so with that, I wish you all the best. And until our next call, the end of the year, hope to hear from you soon. Thank you.

Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.

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