Q3 2026 Blumetric Environmental Inc Earnings Call

August 27, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the BluMetric Environmental Inc. full-year 2026 Q3 conference call. At this time, all lines are in listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the BluMetric Environmental Inc. Full Year 2026 Q3 conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, 27 August 2026. I would now like to turn the conference over to Brandon Chow. Thank you. Please go ahead.

Speaker #1: Only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Speaker #1: This call is being recorded on Thursday, August 27, 2026, and I would now like to turn the conference over to Brandon Chow. Thank you.

Speaker #1: Please go ahead.

Speaker #3: Thank you, operator. Welcome, everyone, to BluMetric Environmental's conference call. This call will cover BluMetric's financial and operating results for the third quarter of fiscal 2026, ended June 30, 2026.

Brandon Chow: Thank you, operator. Welcome everyone to BluMetric Environmental's conference call. This call will cover BluMetric's financial and operating results for the 2026 third fiscal quarter ended 30 June 2026. Following our prepared remarks, we will open the conference call to a Q&A session. Our call today will be led by Scott MacFabe, BluMetric'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 on 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.

Speaker #3: Following our prepared remarks, we will open the conference call to a Q&A session. Our call today will be led by Scott McFade, Bloometric's CEO, and Dan Hilton, the company's CFO.

Speaker #3: 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.

Speaker #3: Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements regarding the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties.

Speaker #3: The company's actual results may differ significantly from those projected or suggested in any forward-looking statements, due to a variety of factors that are discussed in detail in our regulatory filings.

Speaker #3: There may also be references to certain non-IFRS measures, such as EBITDA, adjusted EBITDA, backlog, working capital, free cash flow, and net cash. These non-IFRS measures are not recognized measures under International Financial Reporting Standards, do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies.

Brandon Chow: There may also be references to certain non-IFRS measures such as EBITDA, adjusted 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.

Speaker #3: Please see our disclosures for further information and reconciliations of these non-IFRS measures. I will now hand the call over to Scott McFade. Please go ahead, Scott.

Speaker #4: Thank you, Brandon, for the introduction. Welcome, everyone, to our third quarter 2026 earnings call for Bloometric Environmental. We appreciate all of you taking the time to join us on today's conference call.

Scott MacFabe: Thank you, Brandon Chow, for the introduction. Welcome, everyone, to our Q3 2026 earnings call for BluMetric Environmental. We appreciate all of you taking the time to join us on today's conference call. As per usual, I will start off by providing an overview of the quarter, and Dan Hilton will go into our financial details in more detail. Firstly, we would like to start off by giving those who are new to the story a reminder of who we are and what we do. BluMetric creates a better environment for business. What does that mean? Well, BluMetric 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 50 years.

Speaker #4: And as per usual, I'll start off by providing an overview of the quarter, and Dan will go into our financial details in more detail.

Speaker #4: Firstly, we'd like to start off by giving those who are new to the story a reminder of who we are and what we do.

Speaker #4: Blumetric creates a better environment for business. And what does that mean? Well, Blumetric 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 50 years.

Speaker #4: We've evolved into a specialized integrator of environmental solutions in the fields of water and wastewater treatment, and professional environmental services for the natural and built environments.

Scott MacFabe: 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 and built environments. We aspire to be the environmental solutions and WaterTech company of choice globally. Now let us discuss the quarter in more detail. This third fiscal quarter saw a significant 43% increase in revenues due primarily to the WaterTech USA Group, the acquisitions of both DS Consultants and Whitteker Environmental, and higher utilization in our professional services group. Fiscal Q3 and Q4 are typically our seasonally strongest quarters for professional services because of warm weather and full deployment. We have started to see the benefits of operating leverage in our business model. Winter was long in Ontario this year, and April and May particularly wet.

Speaker #4: We aspire to be the environmental solutions and water tech company of choice globally. Now, let's discuss the third quarter in more detail. This third fiscal quarter saw a significant 43% increase in revenues, due primarily to the Water Tech USA group, the acquisitions of both DS Consultants and Whitaker Environmental, and higher utilization in our Professional Services group.

Speaker #4: Fiscal Q3 and Q4 are typically our seasonally strongest quarters for professional services because of the warm weather and full deployment. We've started to see the benefits of operating leverage in our business model.

Speaker #4: Winter was long in Ontario this year, and April and May were particularly wet. June was the last month of the fiscal quarter and was the first month we saw full utilization within our target range for peak season work.

Scott MacFabe: June was the last month of the fiscal quarter and was the first month we saw full utilization within our target range for peak season work. July and August are tracking similarly. We expect that our fiscal Q4 will be our strongest for professional services this year. Ultimately, seasonality has a larger impact on this fiscal year because of the revenue mix shifting towards a higher proportion of professional services with the acquisition of DS Consultants. We are trying to reduce this impact with initiatives like the acquisition of Whitteker Environmental, which is a business not impacted by weather. We are using Whitteker as a model template to bring water testing services to other geographies in Canada, starting in Ontario, which are highly predictable and recurring in revenue. Furthermore, we are entering a new phase for our WaterTech business, with specific investments now coming online.

Speaker #4: And July and August are tracking similarly. We expect that our fiscal fourth quarter, Q4, will be our strongest for professional services this year. Ultimately, seasonality is a larger impact on this fiscal year because of the revenue mix shifting towards a higher proportion of professional services, with the acquisition of DS Consultants.

Speaker #4: Trying to reduce this impact with initiatives like the acquisition of Whitaker Environmental, which is a business not impacted by weather. We're using Whitaker as a model template to bring water testing services to other geographies in Canada, starting in Ontario, which are highly predictable and recurring in revenue.

Speaker #4: Furthermore, we're entering a new phase for our water tech business with specific investments now coming online. Firstly, a new lease was signed on July 17, 2026, for Water Tech USA. The new lease starts on October 1 this year and will bring our US manufacturing footprint to over 49,000 square feet, nearly double what we have currently.

Scott MacFabe: Firstly, a new lease was signed on 17 July 2026 for WaterTech USA. The new lease starts on 1 October this year and will bring our US manufacturing footprint to over 49,000 square feet, nearly double what we have currently. WaterTech USA continues to be busy securing smaller size projects in the CAD 500,000 to CAD 3 million range. We believe these smaller ones, along with the larger municipal-like projects, will help backfill this new capacity. This will be coupled with O&M, which continues to be a key pillar in our strategy for WaterTech USA. We are in discussions with multiple clients to implement service agreements across groups of existing equipment installations. For WaterTech Canada, we are finalizing the implementation and oversight of our Canadian Program for Cyber Security Certification, known as CPCSC.

Speaker #4: Water Tech USA continues to be busy securing smaller-sized projects in the $500,000 to $3 million range. We believe these smaller ones, along with the larger municipal-like projects, will help backfill this new capacity.

Speaker #4: This will be coupled with O&M, which continues to be a key pillar in our strategy for Water Tech USA. We're in discussions with multiple clients to implement service agreements across groups of existing equipment installations.

Speaker #4: For Water Tech Canada, we're finalizing the implementation and oversight of our Canadian program for cybersecurity certification, known as CPCSC. This new cybersecurity legislation came into place recently, and our strategy within the military market has shifted, where we now expect to bid directly on Canadian military contracts as a prime contractor.

Scott MacFabe: This new cybersecurity legislation came into place recently, and our strategy within the military market has shifted, where we now expect to bid directly on Canadian military contracts as a prime. Our military market currently represents the largest dollar value in our pipeline, and the team is working hard to close on our next flagship contracts. While patience is required for this market, we are optimistic about the opportunities, and we believe that the Canadian government is very motivated to procure Canadian-made equipment and hit NATO spending targets. Lastly, our new ERP system has gone live, which provides us with further visibility and planning benefits across all of our enterprise. These are all examples of investments we have made this fiscal year, which we expect to strengthen our business and create a larger moat and payoff in efficiencies, more recurring revenues, and access to new opportunities.

Speaker #4: Our military market currently represents the largest dollar value in our pipeline, and the team is working hard to close on our next flagship contracts.

Speaker #4: While patience is required for this market, we're optimistic about the opportunities, and we believe that the Canadian government is very motivated to procure Canadian-made equipment and meet NATO spending targets.

Speaker #4: Lastly, our new ERP system has gone live, which provides us with further visibility in planning benefits across all of our enterprise. These are all examples of investments we have made this fiscal year, which we expect will strengthen our business, create a larger moat, and pay off in efficiencies, more recurring revenues, and access to new opportunities.

Speaker #4: In terms of our markets, the third fiscal quarter saw an 80% increase year over year in revenues in our commercial industrial market. This was driven by Water Tech USA and acquisitions.

Scott MacFabe: In terms of our markets, the Q3 saw an 80% increase year over year in revenues in our commercial industrial market. This was driven by WaterTech USA and acquisitions. For government, there was a slight decrease due to the timing of government contract awards and related project activity. Our mining market revenue increased 63%, showcasing the elevated demand for higher value technical consulting services in Northern Ontario and Quebec. We are making an active effort to increase our exposure to this market, given the improving regulatory backdrop and higher commodity prices. Lastly, our military market decreased 47% in revenues, which is mainly due to the Rheinmetall contract concluding. Current revenue levels represent our base load amount of work, mainly comprised of service and smaller contracts. As a reminder, our military market has significant potential as it represents the largest dollar value in terms of our pipeline.

Speaker #4: For government, there was a slight decrease due to the timing of government contract awards and related project activity. Our mining market revenue increased 63%, showcasing the elevated demand for higher-value technical consulting services in Northern Ontario and Quebec.

Speaker #4: We're making an active effort to increase our exposure to this market given the improving regulatory backdrop and higher commodity prices. Lastly, our military market decreased 47% in revenues, which is mainly due to the Rheinmetall contract concluding.

Speaker #4: Current revenue levels represent our base load amount of work, mainly comprised of service and smaller contracts. As a reminder, our military market has significant potential, as it represents the largest dollar value in terms of our pipeline.

Speaker #4: Our goal this year is to secure larger military contracts to backfill capacity, set us up well, also for the next fiscal year. We expect the CPCSC to push forward Canadian manufacturing by small, medium enterprises for the military, and the recent engagement of government relations firms will also help us support this goal.

Scott MacFabe: Our goal this year is to secure larger military contracts to backfill capacity, set us up well also for the next fiscal year. We expect the CPCSC to push forward Canadian manufacturing by small medium enterprises for the military, and the recent engagement of government relation firms will also help us support this goal. We are happy with how we are positioned for the remainder of the fiscal year. We are looking forward to continuing our integration, move into our new space in Florida, and see more traction across all of our markets. We strive to be a growth story, and by achieving higher revenue levels at a scale, we can expect to see improvements in our operating leverage like Q3.

Speaker #4: We're happy with how we're positioned for the remainder of the fiscal year. We're looking forward to continuing our integration, moving into our new space in Florida, and seeing more traction across all of our markets.

Speaker #4: We strive to be a growth story and by achieving higher revenue levels at a scale we can expect to see improvements in our operating leverage like Q3.

Speaker #4: We're a unique Canadian company with unique water technologies and this combined with talented and committed people creates a flywheel for us to become a larger and more dominant player in our markets.

Scott MacFabe: We are a unique Canadian company with unique water technologies, and this, combined with talented and committed people, creates a flywheel for us to become a larger and more dominant player in our markets. I would now like to hand this over to Dan for a more detailed overview on the financials. Please go ahead, Dan.

Speaker #4: I'd now like to hand this over to Dan for a more detailed overview of the financials. Please go ahead, Dan.

Speaker #5: Thank you, Scott. Today, I'll be presenting BluMetric's 2026 third fiscal quarter results in more detail. Revenue for the 2026 third fiscal quarter was $20.9 million, compared to $14.7 million in the prior year.

Dan Hilton: Thank you, Scott. Today, I will be presenting BluMetric's 2026 third fiscal quarter results in more detail. Revenue for the 2026 third fiscal quarter was CAD 20.9 million, compared to CAD 14.7 million in the prior year. As Scott mentioned, the revenues for the period increased primarily due to the acquisition of DS Consultants and Whitteker, who contributed CAD 6 million in revenue this quarter, along with growth in WaterTech USA. As I reminded everyone last quarter, our professional services experiences seasonality with lower revenues in the winter months, which is our fiscal Q1 and Q2. Q3 is where the season starts, and activity ramps up significantly, improving personal utilization. As a result, we saw the benefits of both higher billable hours and the operating leverage associated with this increase over a similar cost structure to prior quarters.

Speaker #5: As Scott mentioned, the revenues for the period increased primarily due to the acquisition of DS Consultants and Whitaker, who contributed $6 million in revenue this quarter.

Speaker #5: Along with growth in water tech USA, as I reminded everyone last quarter, our professional services experience is seasonality with lower revenues in the winter months, which is our fiscal Q1 and Q2.

Speaker #5: Q3 is where the season starts, and activity ramps up significantly, improving personal utilization. As a result, we saw the benefits of both higher billable hours and the operating leverage associated with this increase over a similar cost structure to prior quarters.

Speaker #5: Q4 is expected to be the strongest for professional services, particularly for DS Consultants, who has historically generated a significant amount of revenue and most of its profits in fiscal Q4.

Dan Hilton: Q4 is expected to be the strongest for professional services, particularly for DS Consultants, who has historically generated a significant amount of revenue and most of its profits in fiscal Q4. As Scott mentioned, the late start to the Toronto construction season resulted in a slightly reduced revenue level for DS Consultants of CAD 5.7 million in the quarter, compared to CAD 6.1 million in the same quarter of the prior year. DS Consultants recognized CAD 6.9 million in Q4 of 2025, and we expect it to be its strongest quarter in 2026 as well. They have maintained a very similar cost structure to prior years, and we would expect them to contribute to the consolidated entity accordingly. The Ontario construction market remains strong with an expected spend in an increase over last year. Areas of concentration include Toronto, Ottawa, Hamilton, London, and Northern Ontario, all locations that BluMetric is active in.

Speaker #5: As Scott mentioned, the late start to the Toronto construction season resulted in a slightly reduced revenue level for DS Consultants of $5.7 million in the quarter, compared to $6.1 million in the same quarter of the prior year.

Speaker #5: DS Consultants recognized $6.9 million in Q4 of 2025, and we expect it to be their strongest quarter in 2026 as well. They have maintained a very similar cost structure to prior years, and we would expect them to contribute to the consolidated entity accordingly.

Speaker #5: The Ontario construction market remains strong, with an expected spend increase over last year. Areas of concentration include Toronto, Ottawa, Hamilton, London, and Northern Ontario.

Speaker #5: All locations that BluMetric is active in. Government infrastructure incentives and spending are playing an important role. Overall, we are seeing a shift in sentiment, and we are experiencing higher-than-historic proposal rates across the construction industry.

Dan Hilton: Government infrastructure incentives and spending is playing an important role. Overall, we are seeing a shift in sentiment, and we are experiencing higher than historic proposal rates across the construction industry. Across the company's key markets, the commercial and industrial markets saw an increase in revenues for the previously mentioned reasons. To expand further, WaterTech USA has moved to the initial build and execution phase of several contracts, which have a higher proportion of revenue recognized towards the front end of the project. We are excited about the new lease we have signed, as it will help address capacity constraints and allow the entity to execute on a combination of smaller and larger projects simultaneously. The space will also house our staff who are leading the new O&M division. Our government market continues to be a stable pillar, with revenues down slightly due to the timing of contracts.

Speaker #5: Across the company's key markets, the commercial and industrial sectors saw an increase in revenues for the previously mentioned reasons. To expand further, Water Tech USA has moved to the initial build and execution phase of several contracts, which have a higher proportion of revenue recognized towards the front end of the project.

Speaker #5: We are excited about the new lease we have signed, as will help address capacity constraints and allow the entity to execute on a combination of smaller and larger projects simultaneously.

Speaker #5: The space will also house our staff, who are leading the new O&M division. Our government market continues to be a stable pillar, with revenues down slightly due to the timing of contracts. Our military market saw a decline of 47% in the quarter due to the delivery of the Rheinmetall contract. Revenues increased 66% year-to-date for the first nine months, however.

Dan Hilton: Our military market saw a decline of 47% in the quarter due to the delivery of the Rheinmetall contract. Revenues increased 66% year to date for the first nine months, however. Despite the decline in military, WaterTech revenues overall increased this quarter as we are less reliant on the military market, which has historically had larger projects and revenue recognized over phases. This diversification affords us the ability to execute on contracts in other markets, such as mining and Indigenous water production, while we work to secure larger scale replacement contracts and our next flagship military projects. Lastly, our mining market saw a 63% revenue increase as we continue to take advantage of strengths in metals pricing. This is a market we continue to actively pursue. Our gross margin for the fiscal quarter was 37%, compared to 36% for the prior fiscal year.

Speaker #5: Despite the decline in military, water tech revenues overall increased this quarter as we are less reliant on the military market, which has historically had larger projects and revenue recognized over phases.

Speaker #5: This diversification affords us the ability to execute on contracts in other markets, such as mining and Indigenous water production, while we work to secure larger-scale replacement contracts and our next flagship military projects.

Speaker #5: Lastly, our mining market saw a 63% revenue increase, as we continue to take advantage of strengths in metals pricing. This is a market we are making sure we continue to actively pursue.

Speaker #5: Our gross margin for the fiscal quarter was 37%, compared to 36% for the prior fiscal year. The increase is mainly attributed to revenue mix, with more revenues being recognized from professional services and improvements to our execution.

Dan Hilton: The increase is mainly attributed to revenue mix, with more revenues being recognized from professional services and improvements to our execution. We are quite pleased with the gross margin, as this was a significant improvement over the three prior quarters, where it ranged from 23% to 31%. We remain well within our target range and continue to aim to improve our gross margin over time. Operating expenses, net of depreciation and amortization, increased by CAD 2 million to CAD 7 million in the quarter compared to the prior year. The increase is primarily attributable to operating expenses of CAD 1.7 million related to DS Consultants. Investments in recurring O&M services at WaterTech USA and higher general corporate overhead associated with increased business development, professional fees, and non-cash share-based compensation. This also includes our ERP implementation and the CPCSC certification that Scott discussed.

Speaker #5: We are quite pleased with the gross margin, as this was a significant improvement over the three prior quarters, where it ranged from 23% to 31%.

Speaker #5: We remain well within our target range and continue to aim to improve our gross margin over time. Operating expenses, net of depreciation and amortization, increased by $2 million to $7 million in the quarter, compared to the prior year.

Speaker #5: The increase is primarily attributable to operating expenses of $1.7 million related to DS Consultants, investments in recurring O&M services at Water Tech USA, and higher general corporate overhead associated with increased business development, professional fees, and non-cash share-based compensation.

Speaker #5: This also includes our ERP implementation and the CPCSC certification that Scott discussed. We continue to strive to integrate savings and efficiencies, which have not yet been fully realized.

Dan Hilton: We continue to strive to integrate savings and efficiencies which have not yet been fully realized. Adjusted EBITDA for the fiscal quarter increased from the last quarter to CAD 1.1 million, compared to CAD 0.3 million in the prior year. The increase is mainly attributable to higher revenues, a higher gross margin, which was offset by slightly higher OpEx related to the investments we've been making. A net loss of CAD 756,000 was recorded for the fiscal quarter, compared to a net loss of CAD 451,000 in the prior year. On 30 June 2026, BluMetric had a net cash balance of CAD 1.2 million, compared to a net cash balance of CAD 3.4 million at 30 June 2025. As of 30 June 2026, the company had approximately CAD 5.1 million in cash availability between its operating line and cash balances and was not bound by any debt covenants.

Speaker #5: Adjusted EBITDA for the fiscal quarter increased from the last quarter to 1.1 million, compared to 0.3 in the prior year. The increase is mainly attributable to higher revenues, a higher gross margin, which was offset by slightly higher opex related to the investments we've been making.

Speaker #5: A net loss of $756,000 was recorded for the fiscal quarter, compared to a net loss of $451,000 in the prior year. On June 30th, 2026, Bloometric had a net cash balance of $1.2 million, compared to a net cash balance of $3.4 million at June 30th, 2025.

Speaker #5: As of June 30, 2026, the company had approximately $5.1 million in cash availability between its operating line and cash balances, and was not bound by any debt covenants.

Speaker #5: Working capital remains supportive of our growth strategy at $9.5 million. This fiscal quarter demonstrated the benefits of our operating leverage that we are starting to see.

Dan Hilton: Working capital remains supportive of our growth strategy at CAD 9.5 million. This fiscal quarter demonstrated the benefits of our operating leverage that we are starting to see, particularly for professional services. We want to finish this fiscal year strong and continue to grow our WaterTech business in tandem, setting ourselves up well for the next fiscal year. We have a lot of tailwinds in our markets, and we need to remain focused on the continued integration and investment in our acquisitions while expanding important business lines like O&M and Whitteker Environmental Services. We ultimately have the footprint, capabilities, and cost structure of a larger enterprise, and we'll work towards unlocking that potential in the coming quarters. Our business has nearly tripled in size during the past three years through a series of acquisitions and organic growth.

Speaker #5: Particularly for professional services. We want to finish this fiscal year strong and continue to grow our water tech business in tandem, setting ourselves up well for the next fiscal year.

Speaker #5: We have a lot of tailwinds in our markets, and we need to remain focused on the continued integration and investment in our acquisitions, while expanding important business lines like O&M and Whitaker Environmental.

Speaker #5: We ultimately have the footprint, capabilities, and cost structure of a larger enterprise, and will work toward unlocking that potential in the coming quarters. Our business has nearly tripled in size during the past three years through a series of acquisitions and organic growth.

Speaker #5: We have a reputable platform and critical client relationships in key sectors that allow us to capitalize on near-term opportunities. We are committed to delivering more predictable EBITDA as we continue to integrate our most recent acquisitions.

Dan Hilton: We have a reputable platform and critical client relationships in key sectors to allow us to capitalize on near-term opportunities. We are committed to delivering more predictable EBITDA as we continue to integrate our most recent acquisitions. I would like to thank everyone for taking the time to allow us to present our results to you today. I will now hand it back over to Scott for some concluding remarks.

Speaker #5: 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 for some concluding remarks.

Speaker #1: Thank you, Dan. That was a great update, and I echo the excitement surrounding the opportunities that lie in front of us for the balance of the year.

Scott MacFabe: Thank you, Dan. That was a great update. I echo the excitement surrounding the opportunities that lie in front of us for the balance of the year and beyond. We continue to make investments in our future through business development initiatives, infrastructure improvements, and a commitment to the efficient delivery of our products and services to the market. We look forward to our next call. We will now take questions from call participants. We will pass it over to the operator.

Speaker #1: And beyond. We continue to make investments in our future through business development initiatives, infrastructure improvements, and a commitment to the efficient delivery of our products and services to the market.

Speaker #1: We look forward to our next call. We'll now take questions from call participants, and we'll pass it over to the operator.

Speaker #3: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Thank you. Your first question comes from the line of Stephen Kammermayer from Clarus Securities. Please go ahead.

Speaker #3: You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star, followed by 2.

Speaker #3: If you're using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. Thank you, and your first question comes from the line of Steve Kammermeer from Claris Securities.

Speaker #3: Please go ahead.

Speaker #5: Good morning, guys.

Stephen Kammermayer: Good morning, guys.

Steve Kammermayer: Good morning, guys.

Speaker #6: Morning, Steve.

Dan Hilton: Morning, Steve.

Speaker #5: Just on the, so heading into Q4 here, obviously, DS Consultants had their biggest, the best quarter for the year. How are the other—how are the other sectors?

Stephen Kammermayer: So heading into Q4 here, obviously, DS Consultants will be their best quarter for the year. How are the other sectors or your other silos trending here in the first two months of Q4 versus, say, last year and sequentially here versus Q3?

Steve Kammermayer: So heading into Q4 here, obviously, DS Consultants will be their best quarter for the year. How are the other sectors or your other silos trending here in the first two months of Q4 versus, say, last year and sequentially here versus Q3?

Speaker #5: Are your other silos trending here in the first two months of Q4 versus, say, last year, and sequentially here versus Q3?

Speaker #6: Sure. So I mean, certainly, the main metric that we have to get a feeling for what the results will look like or the utilization that we're seeing with our professional services team, who are very heavily deployed at the moment, in some years, in recent past, we've been impacted by wildfires and by weather challenges in the north.

Dan Hilton: Sure. Certainly, the main metric that we have to get a feeling for what the results will look like or the utilization we're seeing with our professional services team, who are very heavily deployed at the moment. In some years in recent past, we've been impacted by wildfires and by weather challenges in the north. That does not appear to be the case this year. We're delighted to report that our teams are very active with similar size projects to prior years. We have had a number of call-ups that we think will improve our results over prior years marginally. But I can certainly confirm that within our traditional BluMetric professional services team, we're heavily deployed, more deployed than we have been in any quarter. And we're seeing improvements continuous in that area.

Speaker #6: That does not appear to be the case this year. We're delighted to report that our teams are very active with projects of similar size to prior years.

Speaker #6: We have had a number of call-ups that we think will improve our results over prior years, marginally, but I can certainly confirm that within our traditional BluMetric professional services team, we're heavily deployed—more deployed than we have been in any quarter.

Speaker #6: And we're seeing continuous improvements in that area. It is an area of focus for the business and something we're actively trying to improve. But I can confirm that that team is fully deployed.

Dan Hilton: It is an area of focus for the business and something we're actively trying to improve. But I can confirm that team is fully deployed. The DS Consultants team, they actually have started hiring to backfill some additional work that they have. That is a practice that they typically do pursue during heavier parts of the season. They have a workforce that they go after to help manage increase in demand. And so we feel confident, given that their deployment is high and all of their equipment is deployed as well, that they'll be able to repeat last year's numbers. Within the WaterTech group, although the Rheinmetall project has now been fully delivered, there is plenty of work in the pipeline to keep the Canadian WaterTech team fully active. They are working with projects with companies such as CSPAN and Talus. We've got a number of projects with mining companies.

Speaker #6: The DS team consultants have actually started hiring two backfills for some additional work that they have. That is a practice that they typically pursue during heavier parts of the season.

Speaker #6: They have a workforce that they go after to help manage increases in demand. And so we feel confident, given that their deployment is high and all of their equipment is deployed as well, that they'll be able to repeat last year's numbers.

Speaker #6: Within the water tech group, although the Ryan Mattel project has now been fully delivered, there is plenty of work in the pipeline to keep the Canadian water tech team fully active. They are working with projects with companies such as C-SPAN and Talus.

Speaker #6: We've got a number of projects with mining companies. We've got an Indigenous water deployment all set to be released this quarter. And that team seems to be fully at scale.

Dan Hilton: We've got an Indigenous water deployment all set to be released in this quarter, and that team seems to be fully at scale. The WaterTech team in the States continues to impress. We've completed a reorganization down there, which has put a few new people into some critical bodies on the business development side and the O&M side. I would say that is really starting to take off. Without getting into the numbers or setting expectations, we're hoping that the market will interpret our willingness to take on another 25,000 square feet as a strong signal that we have a lot in the pipeline down there, and we expect to continue to ramp up production there.

Speaker #6: And then the Water Tech team in the States continues to impress. We've completed a reorganization down there, which has put a few new people into some critical positions on the business development side and the O&M side.

Speaker #6: And I would say that that is really starting to take off. Without getting into the numbers or setting expectations, we're hoping that the market will interpret our willingness to take on another 25,000 square feet as a strong signal that we have a lot in the pipeline down there, and we expect to continue to ramp up production there.

Speaker #6: So, by all accounts, internally, management feels that Q4 is likely to be, well, the strongest quarter that the company has ever put out, both from a top-line perspective and an EBITDA perspective.

Dan Hilton: By all accounts, internally, management feels that Q4 is likely to be the strongest quarter that a company has ever put out, both from a top-line perspective and an EBITDA perspective. We are very aware of areas where we continue to find improvements. Certainly, there are integration savings still to be had that we are pursuing, and we know that the indirect labor that we carry as a business, which is really a reflection of how efficient we're utilizing our people, is still an area of concern that we're working on. A lot of eyes on that, and certainly, we expect to continue to make improvements in terms of ensuring that we have the right size headcount to manage the projects that we have in hand going forward.

Speaker #6: And we are very aware of areas where we continue to find improvements. Certainly, there are integration savings still to be had that we are pursuing.

Speaker #6: And we know that the indirect labor that we carry as a business, which is really a reflection of how efficiently we're utilizing our people, is still an area of concern that we're working on.

Speaker #6: But a lot of eyes are on that, and certainly, we expect to continue to make improvements in terms of ensuring that we have the right-sized headcount to manage the projects that we have in hand going forward.

Speaker #5: Okay, no, that sounds good. So, it seems like, if I am hearing properly, Q4 DS will be fully deployed, and the other sectors are getting busy.

Stephen Kammermayer: Okay. No, that sounds good. It seems like if I am hearing properly, Q4 DS will be fully deployed, the other sectors getting busy and sort of with a slant call it to professional services. I think sequential margins should improve Q4 from Q3?

Steve Kammermayer: Okay. No, that sounds good. It seems like if I am hearing properly, Q4 DS will be fully deployed, the other sectors getting busy and sort of with a slant call it to professional services. I think sequential margins should improve Q4 from Q3?

Speaker #5: And with a sort of, with a slant—call it to professional services—I think sequential margins should improve in Q4 from Q3?

Speaker #6: That's right. So the single most impactful driver of our margin is sales mix. And with DS and the Canadian as a BluMetric professional services team fully deployed, we should see that strong influence on our gross margin.

Dan Hilton: That's right. The single most impactful driver of our margin is sales mix, and with DS and the Canadian as a BluMetric professional services seem fully deployed. We should see that strong influence on our gross margin, and the levels that we're at now are in the range where we expect for 50/50. Knowing that next quarter could be even slightly higher tilted towards professional services with everybody fully deployed for the full 3 months in the field, that should put positive pressure on our margin.

Speaker #6: And the levels that we're at now are in the range where we expect for 50/50. But knowing that next quarter could be even slightly higher, tilted towards professional services with everybody fully deployed for the full three months in the field, that should put positive pressure on our margin.

Speaker #5: Okay.

Stephen Kammermayer: Okay.

Steve Kammermayer: Okay.

Speaker #2: Steve, this is Scott. Just to add to Dan's commentary, as we step deeper into the integration of DS, I think the benefit of that acquisition will become clearer in terms of how it fits and how it contributes to EBITDA.

Scott MacFabe: Steve, this is Scott. Just to add to Dan's commentary. As we step deeper into the integration of DS, I think the benefit of that acquisition will become clearer in terms of how it fits and how it contributes to EBITDA. One of the many things that we really appreciate about DS is their culture is very much focused on the bottom line and very much focused on deep deployment and efficient deployment of the resources at client's behest. So they hire, they deploy, they pull back when the season's pretty much winding down and then scale back up again, all skills that we appreciate and look to drill deeper into the rest of the operations. I think the curiosities that we need to dispel on what it is that DS does, they're not just building condos.

Speaker #2: But one of the many things that we really appreciate about DS is their culture is very much focused on the bottom line, and very much focused on deep deployment and efficient deployment of resources at the client's behest.

Speaker #2: So they hire, they deploy, they pull back when the season's pretty much winding down and then scale back up again all skills that we appreciate and look to deep drill deeper into the rest of the operations.

Speaker #2: But I think the curiosities that we need to dispel on what it is that DS does—they're not just building condos. This is a company that is deeply connected to the entire construction industry in Canada.

Scott MacFabe: This is a company that is deeply connected to the entire construction industry in Canada, which includes a very diverse client base. We are very happy with how things are going with DS in terms of the scale of deployment, the diversity in their client base, that is all stepping up and the pivot that they are taking to be a really nice add to push towards the block in our bottom line. So that part of the business is what is going well. Also just the benefits and scale of putting their group tool together and working closer and integrating with the existing consultancy within BluMetric gives us the opportunity to go after larger, better contracts with longer tails and more reliability. So it solves many challenges that we have had.

Speaker #2: Which includes a very diverse client base. And we're very happy with how things are going with DS in terms of the scale of deployment and the diversity in their client base. That's all stepping up in the pivot that they're taking to be a really nice add to push towards the block and our bottom line.

Speaker #2: So that part of the business is what is going well. And also, just the benefits and scale of putting their group tool together and working closer and integrating with the existing consultancy within Blumetric gives us the opportunity to go after larger, better contracts with longer tails.

Speaker #2: And more reliability. So, it solves many challenges that we've had. I think in terms of the value of the acquisition, and the benefit of integration, both will continue to show up going forward.

Scott MacFabe: I think in terms of the value of the acquisition and the benefit of integration will continue to show up going forward. I think in Q4 is a step in the right direction. We do know this is a big acquisition for us, and we do not even have them a full year into the house yet. I think the integration team is doing very well. The other point to this is Dan's team and others have worked very hard to bring our new ERP system in place, which has been an investment we needed to make since the day I came here. Often that can be very disruptive. It is always expensive, but it is necessary as we run a better business and grow.

Speaker #2: And I think Q4 is a step in the right direction. But we do know this was a big acquisition for us, and we don't even have a full year in-house yet.

Speaker #2: But I think the integration team is doing very well. The other point to this is, Dan's team and others have worked very hard to bring our new ERP system in place, which has been an investment we needed to make since the day I came here.

Speaker #2: And often, that can be very disruptive. It's always expensive, but it's necessary as we run a better business and grow. And what I'm delighted to see is, despite all of that, we're not seeing an impact on our ability to bill and collect on our contracts, even though it's requiring others to lean in heavier to pick up new skills and understand new systems.

Scott MacFabe: What I am delighted to see is, despite all of that, we are not seeing an impact on our ability to bill and collect on our contracts, even though it is requiring others to lean in heavier to pick up new skills and understand new systems. It has not negatively impacted, I believe, the operation in the business. It is only improving it. So having been through this many times, I know there is always with trepidation when you make this kind of an investment, it can be disruptive, but I am not seeing that. I am seeing an excellent deployment of that, and it is a necessary investment that I know is more cost, but it definitely is going to show up in terms of visibility into the business, making better decisions going forward, and the agility of how we operate.

Speaker #2: It hasn't negatively impacted, I believe, the operation or the business; it's only improving it. Having been through this many times, I know that there's always some trepidation when you make this kind of investment—it can be disruptive.

Speaker #2: But I'm not seeing that. I'm seeing an excellent deployment of that, and it's a necessary investment that I know is more cost. But it definitely is going to show up in terms of visibility into the business, making better decisions going forward, and the agility of how we operate.

Stephen Kammermayer: Mm-hmm. Okay. Maybe just back on the DS here. So fully deployed here Q4 as well as July or, sorry, June. April, May, maybe a little bit slower due to some wet weather. How is the business trending to hit the earn-out EBITDA of, I believe it was CAD 4 million this year?

Steve Kammermayer: Mm-hmm. Okay. Maybe just back on the DS here. So fully deployed here Q4 as well as July or, sorry, June. April, May, maybe a little bit slower due to some wet weather. How is the business trending to hit the earn-out EBITDA of, I believe it was CAD 4 million this year?

Speaker #5: Okay. Maybe just back on the DS here. So, fully deployed here Q4, as well as July—or sorry, June, May, April. May maybe a little bit slower due to some wet weather.

Speaker #5: How is the business trending to hit the earn-out EBITDA of, I believe it was $4 million this year?

Speaker #6: Steve, you still there?

Scott MacFabe: Steve, you still there?

Speaker #5: Yep. I'm here.

Stephen Kammermayer: Yep, I'm here.

Steve Kammermayer: Yep, I'm here.

Speaker #6: Okay. Sorry. Yeah, go ahead, Dan.

Scott MacFabe: Okay, sorry. Yeah, go ahead, Dan.

Speaker #3: Yeah. So they feel confident that they're going to hit the earn-out. I think we are, to be conservative, based on what they've done to date and the slow start to the season, a little bit more cautious.

Dan Hilton: Yeah. They feel confident that they are going to hit the earn-out. I think we are, to be conservative, based on what they have done to date and the slow start to the season, a little bit more cautious. We think it will be close. Their earn-out is about CAD 1.5 million, with a target of CAD 4 million in EBITDA. They still feel very confident they are going to achieve it. The one thing to keep in mind, Steve, is that their earn-out is not based on our fiscal year. It is based on the anniversary date of the acquisition, which puts it at December. So they will have many more strong months of good weather in order to build back up and make up for those two late months of start that they experienced earlier this year. I think their confidence is high.

Speaker #3: We think it will be close. Their earn-out is about $1.5 million with a target of $4 million in EBITDA. They feel very confident they're going to achieve it.

Speaker #3: Now, the one thing to keep in mind, Steve, is that the earn-out is not based on our fiscal year. It's based on the anniversary date of the acquisition, which puts it at December.

Speaker #3: So they will have many more strong months of good weather in order to build back up and make up for those two late months of start that they experienced earlier this year.

Speaker #3: So I think their confidence is high. And as long as the weather holds through November and the month of December, they'll probably come very close.

Dan Hilton: As long as the weather holds through November and the month of December, they will probably come very close. I think from our perspective, we certainly see them going full tilt at the moment. We expect them to be doing as good a job this quarter as they did in the same quarter last year. But it is really going to be about whether they can catch up for those two months. I think it is going to be a little bit about how long the season goes this year, but just keep in mind it goes right through till December. But they are very confident, and they have certainly ramped up. They have added additional headcount. So they believe the work is there. It will come down to whether they are successful in deploying and the weather holds, I think, for the balance of the season.

Speaker #3: I think, from our perspective, we certainly see them going full tilt at the moment. We expect them to be doing as good a job this quarter as they did in the same quarter last year.

Speaker #3: But it's really going to be about whether they can catch up for those two months. And so I think it's going to be a little bit about how long the season goes this year.

Speaker #3: But just keep in mind it goes right through till December. But they're very confident, and certainly, they've ramped up. They've added additional headcount.

Speaker #3: So, they believe the work is there. It'll come down to whether they're successful in deploying and whether the weather holds, I think, for the balance of the season.

Speaker #5: Okay, great. That's all I had, guys. Thank you.

Stephen Kammermayer: Okay, great. That is all I had, guys. Thank you.

Steve Kammermayer: Okay, great. That is all I had, guys. Thank you.

Speaker #2: Thanks, Steve.

Scott MacFabe: Thanks, Steve.

Speaker #6: Thank you.

Dan Hilton: Thank you.

Speaker #1: Thank you. Once again, should you have a question, please press star followed by one on your telephone keypad. And your next question comes from the line of Doug Johnson.

Operator: Thank you. Once again, should you have a question, please press star 4 by the one on your telephone keypad. Your next question comes from the line of Doug Johnson. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Hello. I'm very much concerned about this financial statement. Last quarter, I made the point that I'm getting tired of losses, and I'd like to see some profit at some point.

Operator: Hello. I am very much concerned about this financial statement. Last quarter, I made the point I am getting tired of losses, and I would like to see some profit at some point. It was suggested that there should be a profit in this quarter. That is specifically what was said, that you could look forward to some profits. However, the earnings are even more. The loss, rather, is even more, despite a strong Q3 from DS, apparently. I just heard that there was a reorganization of Gemini, which to me suggests there had been some issues there. I have also heard that you are acknowledging some problems integrating DS. I am just concerned. It sounds like there is a real management problem integrating the companies and particularly controlling costs. I repeat my question again, when will we actually see some profits?

Doug Johnson: Hello. I am very much concerned about this financial statement. Last quarter, I made the point I am getting tired of losses, and I would like to see some profit at some point. It was suggested that there should be a profit in this quarter. That is specifically what was said, that you could look forward to some profits. However, the earnings are even more. The loss, rather, is even more, despite a strong Q3 from DS, apparently. I just heard that there was a reorganization of Gemini, which to me suggests there had been some issues there. I have also heard that you are acknowledging some problems integrating DS. I am just concerned. It sounds like there is a real management problem integrating the companies and particularly controlling costs. I repeat my question again, when will we actually see some profits?

Speaker #2: And it was suggested that there should be a profit in this quarter. That is specifically what was said — that you could look forward to some profits in one way or another.

Speaker #2: But, however, the earnings are even more—the loss, rather, is even more—despite a strong third quarter from DS, apparently. I just heard that there was a reorganization of Gemini.

Speaker #2: Which, to me, suggests there have been some issues there. I've also heard that you're acknowledging some problems integrating DS. I'm just concerned—it sounds like there's a real management problem integrating the companies, and particularly controlling costs.

Speaker #2: I repeat my question again: When will we actually see some profits?

Scott MacFabe: Doug, thank you for your questions. This is Scott. Let me start with a few comments you have made and make sure that we dispel any impressions you may have. Number 1, the organization or reorganization we are talking about in Gemini really is just elevating within their organization future leaders so that the company is resilient and has a future. Often is the case when there is an acquisition, you bring them into your organization, the founders are eventually looking to retire or take on a different role. All that we have done there is take a good look at that business, identify with the original founders' help, basically Christmas future management for that group. They are all internal. We have a couple of individuals who have stepped in or are stepping up nicely, and Dan and I work with them, and that is a very positive thing.

Speaker #6: Doug, thank you for your question. This is Scott. Let me start with a few comments you've made, and make sure that we dispel any impressions you may have.

Speaker #6: Number one, the organization or reorganization we're talking about in Gemini really is just elevating, within their organization, future leaders so that the company is resilient and has a future.

Speaker #6: Often, when there's an acquisition, you bring them into your organization. The founders are eventually looking to retire or take on a different role.

Speaker #6: And so all that we've done there is take a good look at that business, identify with the original founder's help, basically, 'Christmas future' management for that group.

Speaker #6: And they were all internal. And we have a couple of individuals who have stepped in or are stepping up nicely, and Dan and I work with them.

Speaker #6: And that's a very positive thing. We're not having a problem integrating Gemini at all. They're growing nicely, and we're taking on new space to accommodate the future growth that we see within their backlog and their pipeline.

Scott MacFabe: We are not having a problem integrating Gemini at all. They are growing nicely. We are taking on new space to accommodate the future growth that we see within their backlog and their pipeline. That is Gemini. In terms of DS just completed our first year in terms of integration. We hear from both sides that it is going well. The company, DS as an enterprise, is becoming more understanding of connections and opportunity for us to commit to and win larger, better work together. We closed our Scarborough office and integrated that Toronto group into DS because we felt it was better stewardship of those individuals and a better result for clients. We did that immediately, and that was a very positive outcome. Culturally, we are very well-aligned.

Speaker #6: So that's Gemini. In terms of DS, DS has just completed our first year in terms of integration. We hear from both sides that it's going well.

Speaker #6: The company DS, as an enterprise, is becoming more understanding of connections and opportunities for us to commit to and win larger, better work together.

Speaker #6: We closed our Scarborough office and integrated that Toronto group into DS because we felt it was better stewardship of those individuals and a better result for clients.

Speaker #6: We did that immediately, and that was a very positive outcome. Culturally, we're very well aligned. In fact, what we love about DS in many ways is that they are even more focused on delivering on the bottom line than, culturally, perhaps we need to be.

Scott MacFabe: In fact, what we love about DS in many ways is they are even more so focused on delivering on the bottom line than, culturally perhaps, we need to be, and definitely should be. As far as the acquisitions and the integration is going, we could talk further if you would like to have an offline discussion, but from all points in our experience, it is going very, very well. I am going to pass it to Dan. Maybe he can talk a little bit more in terms of profitability and where we are headed.

Speaker #6: And it definitely should be. So, as far as the acquisitions and the integration are going, we could talk further if you'd like to have an offline discussion.

Speaker #6: But from all points in our experience, it's going very, very well. I'm going to pass it to Dan. Maybe he can talk a little bit more in terms of profitability and where we're headed.

Speaker #3: Yeah, for sure. Absolutely. So, I just wanted to highlight that, regarding profitability, there is no question—as you had identified—that the net income figure is lower for the period.

Dan Hilton: Yeah, for sure. Absolutely. I just wanted to highlight that profitability, there is no question, as you had identified, that the net income figure is lower for the period. However, a significant component of that is the finalization of the valuation of DS Consultants, the split between goodwill and intangibles, and the associated amortization associated with that. You will see in Q3, the period we just closed, a material increase in amortization of intangibles, which is a non-cash charge, and that is the primary driver of the slip in net income. Those transactions have now been completed. We use our accounting firms and third parties to assist with those valuations to make sure there is no impact and no anticipated changes in our year-end financials. But from a cash perspective, the business has done materially better in Q3 than in prior quarters, and we expect that to continue into Q4.

Speaker #3: However, a significant component of that is the finalization of the valuation of DS Consulting—the split between goodwill and intangibles, and the associated amortization with that.

Speaker #3: So you will see in Q3, the period we just closed, a material increase in amortization of intangibles, which is a non-cash charge. And that's the primary driver of the slip in net income.

Speaker #3: Those transactions have now been completed. We use our accounting firms and third parties to assist with those valuations to make sure there's no impact and no anticipated changes in our year-end financials.

Speaker #3: But from a cash perspective, the business has done materially better in Q3 than in prior quarters, and we expect that to continue into Q4.

Dan Hilton: As we mentioned earlier, the entirety of the professional services team, which is the only group that drives seasonality in the business, is fully deployed for all three months in Q4 versus only one of the three months being fully deployed in Q3. So we anticipate very strong results in Q4.

Speaker #3: As we mentioned earlier, the entirety of the professional services team—which is the only group that drives seasonality in the business—is fully deployed for all three months in Q4.

Speaker #3: Versus only one of the three months being fully deployed in Q3, so we anticipate very strong results in Q4.

Speaker #2: Following up, Dan, you referred to the amortization and that the goodwill for DS was greater than expected. My understanding of goodwill is that it’s the deemed value of the company versus what was paid.

Dan Hilton: Following up, Dan, you referred to the amortization and the goodwill. I am reading into that the goodwill for DS was greater than expected. My understanding of goodwill is the deemed value of the company versus what was paid.

Doug Johnson: Following up, Dan, you referred to the amortization and the goodwill. I am reading into that the goodwill for DS was greater than expected. My understanding of goodwill is the deemed value of the company versus what was paid.

Speaker #3: Yes, it's actually the opposite in this case. So, goodwill is not amortized—it's the intangible asset that's amortized, which is the value of the clients, the IP, and the relationships that they have.

Dan Hilton: It is actually the opposite in this case. Goodwill is not amortized. It is the intangible asset that is amortized, which is the value of the clients and the IP and the relationships that they have. When we originally put the transaction in our books, not knowing how much we can assign to the intangible asset, it typically goes to goodwill as a holding spot. Then as you get deeper into the analysis, you are able to allocate more to intangibles and feel confident that you have that asset going forward. What has happened over the last quarter with the help of our professionals is that we have been able to put forward a very solid case to represent the value of the purchase. That increased the asset, the intangible asset, and it is the intangible asset that is amortized, and that is what is driving it, not the goodwill.

Speaker #3: And so, when we originally put the transaction in our books, not knowing how much we can assign to the intangible asset, it typically goes to goodwill as a holding spot. Then, as you get deeper into the analysis, you're able to allocate more to intangibles and feel confident that you have that asset going forward.

Speaker #3: So what's happened over the last quarter, with the help of our professionals, is that we've been able to put forward a very solid case to represent the value of the purchase.

Speaker #3: That increased the asset, the intangible asset, and it's the intangible asset that's amortized, and that's what's driving it, not the goodwill.

Speaker #2: I wanted to follow up with the equity offering that accompanied the DS purchase. Was the full 11.5 million shares sold?

Dan Hilton: I wanted to follow up with the equity offering that accompanied the DS purchase. Was the full 11.5 million shares sold?

Doug Johnson: I wanted to follow up with the equity offering that accompanied the DS purchase. Was the full 11.5 million shares sold?

Speaker #3: Sorry, can you ask that again, guys? I just want to make sure I'm understanding correctly.

Dan Hilton: Sorry, can you ask that again, guys? I just want to make sure I am understanding correctly.

Dan Hilton: There was a follow-up equity offering at the time of DS's purchase.

Doug Johnson: There was a follow-up equity offering at the time of DS's purchase.

Speaker #2: There was a follow-up equity offering at the time of DS's purchase, with Clarus and Raymond James selling on a best-efforts basis up to 11.5 million common shares.

Dan Hilton: Yes, it was fully subscribed.

Dan Hilton: With Clarus and Raymond James sell on a best efforts basis up to 11.5 million common shares. How many of those shares were actually sold?

Doug Johnson: With Clarus and Raymond James sell on a best efforts basis up to 11.5 million common shares. How many of those shares were actually sold?

Speaker #2: How many of those shares were actually sold?

Speaker #3: Yes, it was fully subscribed. The full amount of the offering was picked up by the market.

Dan Hilton: Yeah, it was fully subscribed. The full amount of the offering was picked up by the market.

Speaker #2: Okay. I guess I wanted to say I'm still very concerned that even though business is much better, and revenue has increased significantly, you're still running at a loss.

Dan Hilton: Okay. I guess I wanted to say I am still very concerned that even though business is much better, revenue is vastly increased, you are still running at a loss. I asked last time why the stock seemed to be struggling, and the suggestion was that partly it was, as with so many companies, a concern about the impact of AI, and that you two felt the AI concern was not a valid concern for the market. I guess my concern now is that AI be darned. The market is concerned that you cannot ever turn a profit. I will just leave it at that. I wanted to follow up on an unrelated topic, though.

Doug Johnson: Okay. I guess I wanted to say I am still very concerned that even though business is much better, revenue is vastly increased, you are still running at a loss. I asked last time why the stock seemed to be struggling, and the suggestion was that partly it was, as with so many companies, a concern about the impact of AI, and that you two felt the AI concern was not a valid concern for the market. I guess my concern now is that AI be darned. The market is concerned that you cannot ever turn a profit. I will just leave it at that. I wanted to follow up on an unrelated topic, though.

Speaker #2: And I asked last time why the stock seemed to be struggling. And the suggestion was that partly it was as of so many companies, the concern about the impact of AI and that you felt you two felt the AI concern was not a valid concern for the market.

Speaker #2: I guess my concern now is that AI being armed, the market's concerned that you can't ever turn a profit. And I'll just leave it at that.

Speaker #2: I wanted to follow up on an unrelated topic though. I asked last time when you purchased when you made Scott the chairman and CEO, I made a comment that I felt that was very poor governance as in my view, it has been quite clear that the government that the CEO and the board chair should be different individuals.

Dan Hilton: I asked last time when you made Scott the Chairman and CEO, I made a comment that I felt that was very poor governance, as in my view, it has been quite clear that the CEO and the board chair should be different individuals. I asked last time, now this is more than a year and a half now that that decision was made. I asked last meeting, last session, what was happening with an independent lead director, and I was told that the board meeting upcoming would address that. Is there now an independent lead director, and what is his name?

Doug Johnson: I asked last time when you made Scott the Chairman and CEO, I made a comment that I felt that was very poor governance, as in my view, it has been quite clear that the CEO and the board chair should be different individuals. I asked last time, now this is more than a year and a half now that that decision was made. I asked last meeting, last session, what was happening with an independent lead director, and I was told that the board meeting upcoming would address that. Is there now an independent lead director, and what is his name?

Speaker #2: So I asked last time—now, this is more than a year and a half since that decision was made. I asked at the last meeting, last session, what was happening with the independent director, and I was told that the upcoming board meeting would address that.

Speaker #2: Is there now an independent lead director, and what's his name?

Speaker #3: I actually think that was a question you asked, I believe, at the AGM, and during our last call I addressed that by informing you that we had a lead external director, and his name is Mohsen Mortada.

Dan Hilton: Actually, Doug, that was a question you asked, I believe, at the AGM. During our last call, I addressed that by informing you that we had in fact identified that lead external director, and his name is Mohsen Mortada. We have addressed that already with you. You may not recall.

Speaker #3: So we have already addressed that with you. You may not recall.

Speaker #2: Yeah, no, I mentioned that. You mentioned it was pending at the subsequent board meeting, because I noticed that on your website there is no reference to him as having that title.

Dan Hilton: Yeah, no, I mentioned that. You mentioned it was pending at the subsequent board meeting. Because I noticed that in your website, there is no reference to him as having that title. In the two new documents that were passed in May, approved by the board in May of 2026, the charter for the governance and the charter for the board, there is no mention whatsoever of a lead independent director, how that person is named, what those powers are. In fact, as far as I can see, the lead independent director may exist in a mystery, but in fact does not exist at the company. I am concerned that the company is just going through the motions of a lead independent director, which, as you know, is required by securities law.

Doug Johnson: Yeah, no, I mentioned that. You mentioned it was pending at the subsequent board meeting. Because I noticed that in your website, there is no reference to him as having that title. In the two new documents that were passed in May, approved by the board in May of 2026, the charter for the governance and the charter for the board, there is no mention whatsoever of a lead independent director, how that person is named, what those powers are. In fact, as far as I can see, the lead independent director may exist in a mystery, but in fact does not exist at the company. I am concerned that the company is just going through the motions of a lead independent director, which, as you know, is required by securities law.

Speaker #2: And in the Q new documents that were passed in May, approved by the board in May of 2026, the charter for the governance and the charter for the board, there is no mention whatsoever of a lead independent director, how that person is named, what those powers are.

Speaker #2: In effect, as far as I can see, the lead independent director may exist in theory, but in fact, does not exist at the company.

Speaker #2: And I'm concerned that the company is just going through the motions of a lead independent director, which, as you know, is required by securities law.

Speaker #2: And it's now been a year and a half since you made the decision to combine the CEO and the board chair positions.

Dan Hilton: It has now been a year and a half since you made the decision to combine the CEO and the board chair positions. Why is the lead independent director not exist in the board documents that were approved just a few months ago?

Doug Johnson: It has now been a year and a half since you made the decision to combine the CEO and the board chair positions. Why is the lead independent director not exist in the board documents that were approved just a few months ago?

Speaker #2: So why does the lead independent director not exist in the board documents that were approved a few months ago?

Dan Hilton: Well, we will look at it. Doug, if you go back to the minutes from our last quarter's or previous quarter's call, I believe my verbatim reply to you was that I am happy to report that we have, in fact, identified our lead independent director, and his name is Mohsen Mortada, a very capable water expert and he is a perfect candidate for that role, and he has been installed in that place at minimum since our last conversation from our previous quarter. So I appreciate your concern, but I hope the facts will allay them in that that has been put in place. If our documents have not caught up, I will make sure that we address that in an addendum.

Speaker #3: We'll look at it. But Doug, if you go back to the minutes from our last quarter's, or previous quarter's, call, I believe my verbatim reply to you was that I am happy to report that we have, in fact, identified our lead independent director, and his name is Mohsen Mortada.

Speaker #3: A very capable water expert and he is a perfect candidate for that role and he has been in that place been installed in that place at minimum since our last conversation from our previous quarter.

Speaker #3: So I appreciate your concern, but I hope the facts will allay them. In that, that has been put in place. If our documents haven't caught up, I'll make sure that we address that in an addendum.

Speaker #2: With respect, the documents haven't caught up—specifically, the board of directors charter and the governance charter. In May, after the previous financial meeting, as I recall—or maybe it was relative to the annual meeting.

Dan Hilton: With respect, the documents have not caught up. The board approved the board of directors charter and the governance charter in May after the previous financial meeting, as I recall, or maybe it was relative to the annual meeting. This was approved just a few months ago, and the fact is that the role of the lead independent director is entirely silent. He has no jurisdiction according to the board, a governance document that was approved by this board just a few months ago. He has no existence. He has no powers. He has no role to play. I am sorry, those are the facts. The fact you have named somebody to a toothless position that, in fact, does not exist in the documents suggests you are not really committed to the proper role of a lead independent director. Just looking into it should have been looked into at the time.

Doug Johnson: With respect, the documents have not caught up. The board approved the board of directors charter and the governance charter in May after the previous financial meeting, as I recall, or maybe it was relative to the annual meeting. This was approved just a few months ago, and the fact is that the role of the lead independent director is entirely silent. He has no jurisdiction according to the board, a governance document that was approved by this board just a few months ago. He has no existence. He has no powers. He has no role to play. I am sorry, those are the facts. The fact you have named somebody to a toothless position that, in fact, does not exist in the documents suggests you are not really committed to the proper role of a lead independent director. Just looking into it should have been looked into at the time.

Speaker #2: But this was approved just a few months ago. The fact is that the role of the lead independent director is entirely silent—he has no jurisdiction according to the board.

Speaker #2: A governance document that was approved by this board just a few months ago. He has no existence. He has no powers. He has no role to play.

Speaker #2: I'm sorry, those are the facts. The fact that you've named somebody to a toothless position, which in fact does not exist in the documents, suggests you're not really committed to the proper role of a lead independent director.

Speaker #2: And just looking into it, it should have been looked into at the time. I'm a dummy here when it comes to things like that.

Dan Hilton: I am a dummy here when it comes to things like that, and I do not know where your governance experts are that they approved this document while completely excluding the existence of the lead independent director.

Doug Johnson: I am a dummy here when it comes to things like that, and I do not know where your governance experts are that they approved this document while completely excluding the existence of the lead independent director.

Speaker #2: And I don't know where your governance experts are, that they approved this document while completely excluding the existence of the Lead Independent Director.

Speaker #3: So I'm happy to take that away, Doug. I will pursue those documents with our counsel, make sure they're updated. But I can confirm that Mohsen is in that role and, to the extent that role has been granted any powers, as you've mentioned as a requirement, he has those powers. He is the spokesman as the independent lead director for the balance of the other independent directors.

Dan Hilton: I am happy to take that away, Doug. I will pursue those documents with our counsel, make sure they are updated. I can confirm that Mohsen Mortada is in that role, and to the extent that role has been granted any powers, as you have mentioned, as a requirement, he has those powers. He is the spokesman as the independent lead director for the balance of the other independent directors, and he certainly understands the role and took it on willingly as a result of the comments that you put forward at the AGM. It is Dan Hilton here. I will happily pursue that and make sure that any documents are properly rectified.

Speaker #3: And he certainly understands the role and took it on willingly, as a result of the comments that you put forward at the AGM. So it's Dan here.

Speaker #3: I will happily pursue that and make sure that any documents are properly rectified.

Speaker #2: That's it. If not, that's fine. I'm not impressed, given that this is now 18 months after you were required to have a lead independent director.

Dan Hilton: That is fine. I am not impressed given that this is now 18 months after you were required to have a lead independent director. I will sign off for the moment. Thank you.

Doug Johnson: That is fine. I am not impressed given that this is now 18 months after you were required to have a lead independent director. I will sign off for the moment. Thank you.

Speaker #2: I'll sign off for the moment. Thank you.

Speaker #1: Thank you. Once again, that is Star, and if you want to ask a question. And your next question comes from the line of Todd Radens from Canaccord Genuity.

Operator: Thank you. Once again, that is star and 1 to ask a question. Your next question comes from the line of Todd Radons from Canaccord Genuity. Please go ahead.

Speaker #1: Please go ahead.

Speaker #4: Hey guys, congrats on a great quarter. I think it was very positive. Obviously, the revenue growth, rising margins on top of that, and ultimately, I mean, I really look to EBITDA that you've tripled, and really cash flow.

Todd Radons: Hey, guys. Congrats on a great quarter. I think it was very positive. Obviously, the revenue growth, rising margins on top of that. Ultimately, I really look to EBITDA that you have tripled and really cash flow. That is where it comes down to it, free cash flow. You have more than doubled your free cash flow from a year ago. I completely understand all the amortization stuff. It is great for your taxes. I do not think it really impacts the business at all if it is non-cash. I guess one question I just had was, how many of the installed units that you have now are candidates for the service agreements that you can go after down south?

Speaker #4: I mean, that's what it comes down to—free cash flow. You more than doubled your free cash flow from a year ago. I completely understand all the amortization stuff.

Speaker #4: It's great for your taxes. I don't think it really impacts the business at all. If it's non-cash, I guess one question I just had was, how many of the installed units that you have now are candidates for the service agreements?

Speaker #4: That you can go after down south?

Speaker #3: Oh, I would say the vast majority. So, we have—we're getting close to over 100 now, total solutions that we've put in place. And we had focused primarily on maintenance contracts on the water production side.

Dan Hilton: Oh, I would say the vast majority. We are getting close to over 100 now total solutions that we have put in place, and we had focused primarily on O&M maintenance contracts on the water production side. However, recently we added to the team an individual who used to run one of the water facilities for Samsung in the United States to take on our O&M practice and to help to continue that to grow. His experience is focused primarily on the wastewater side. We have got a unique skill set in the area that we are active, which is in the Florida and Texas markets in the United States, plus his experience in the Caribbean and the balance of the team's experience in the Caribbean. We think all of our contracts going forward will have O&M requests to them, and we will have a high probability of landing those.

Speaker #3: However, recently we added to the team an individual who used to run one of the water facilities for Samsung in the United States to take on our O&M practice and to help continue that to grow.

Speaker #3: And his experience, his focus, is primarily on the wastewater side. And so we've got a unique skill set in the area that we're active, which is the Florida and Texas markets in the United States.

Speaker #3: Plus his experience in the Caribbean and the balance of the team's experience in the Caribbean. So we think all of our contracts going forward will have O&M requests to them, and we'll have a high probability of landing those.

Speaker #3: We have had a number of experiences recently where clients have come back asking us to step in and take over on a number of assignments, and we're negotiating contracts with those.

Dan Hilton: We have had a number of experiences recently where clients have come back, asking us to step in and take over on a number of assignments, and we are negotiating contracts with those. I think the big driver here for us that we are seeing is it is very challenging for the institutions that put these water systems in place to find locals in the Caribbean and in these small local markets to assume control and management of these systems. They are really reaching out to us to take advantage of the expertise that we have to deliver people, to provide oversight, and then to train locals to help them keep the cost down. Ultimately, we would expect the vast majority of these contracts going forward to carry an O&M contract alongside once they go through the commissioning process.

Speaker #3: So, I think the big driver here for us that we're seeing is it's very challenging for the institutions to put these water systems in place, to find locals in the Caribbean and in these small local markets to assume control and management of these systems.

Speaker #3: And so they're really reaching out to us to take advantage of the expertise that we have, to deliver people to provide oversight, and then to train locals to help them keep the cost down.

Speaker #3: But ultimately, we would expect the vast majority of these contracts, going forward, to carry an O&M contract alongside, once they go through the commissioning process.

Speaker #2: And Todd, if I could add as well to Dan's commentary—he is absolutely right. But another interesting development that we're finding is also on the deployment of these systems.

Scott MacFabe: Todd, if I could add as well to Dan's commentary, he is absolutely right. Another interesting development that we are finding is also on the deployment of these systems. We have clients where we will do a design, and we will send them the system, and they want to execute the installation, deployment, and so on. We are finding more and more, they are just putting up the white flag and just saying, "We are not good at it. We would rather you do it. Take this on." In doing so, that kind of represents a step change lift in our opportunity to generate high margin revenue in that part of the business as well. All that does is it just comes out of having done it over and over and doing it very well where that is the brand. That is the most efficient selling we can do into our business.

Speaker #2: We have clients where we'll do a design, and we'll send them the system, and they want to execute the installation, deployment, and so on.

Speaker #2: And we're finding more and more, they're just putting up the white flag and saying, "We're not good at it. We'd rather you do it, take this on."

Speaker #2: And doing so, that kind of represents a step-change lift in our opportunity to generate high-margin revenue in that part of the business as well.

Speaker #2: And all that does—it just comes out of having done it over and over, and doing it very well, where that's the brand. And that's the most efficient selling we can do into our business.

Speaker #2: And so really delighted to hear that feedback coming out of our operations. In terms of military, everything we install—one of our differentiators, in many ways, a moat around what we do—is that we service what we sell.

Scott MacFabe: Really delighted to hear that feedback coming out of our operations. In terms of military, everything we install, one of our differentiators in many ways a moat around what we do is that we service what we sell. We have a full suite of field service reps in Canada that most are ex-military, and they deploy, and they make sure that everything stays in operation. In fact, that has driven most of our competition out of Canada because they cannot do that from afar. The last piece is we really have eyes on this new system we have now installed. We are waiting for final fit up in BC for a remote First Nations community to give them clean water and avoid boil bans.

Speaker #2: And so we have a full suite of field service reps in Canada, that are most are ex-military. And they deploy and they make sure that everything stays in operation.

Speaker #2: And in fact, that has driven most of our competition out of Canada, because they can't do that from afar. And the last piece is we really have eyes on this new system.

Speaker #2: We have now installed, and we're waiting for final fit-up in B.C. for a remote First Nations community to get them clean water and avoid boil water advisories.

Speaker #2: We know there are many eyes on that project within the Indigenous community. And in many ways, that's a passion project for us. It's something that we really want to grow for all the right reasons.

Scott MacFabe: We know there are many eyes on that project within the Indigenous community, and in many ways, that is a passion project for us. It is something that we really want to grow for all the right reasons, but within Canada is a huge need. I think that is a key piece of the success and continued growth of that business for us is the commitment to make sure that we are just known as the designers, the developers, and the fabricators. We have to make sure that we take care of the full cycle of deployment of those water solutions, water and wastewater.

Speaker #2: But within Canada, there's a huge need. So, I think that is a key piece of the success and eventual and continued growth of that business for us—the commitment to make sure that we're just known as the designers, the developers, and the fabricators.

Speaker #2: We have to make sure that we take care of the full cycle of deployment of those water solutions, both water and wastewater.

Speaker #3: Maybe just to tack on one more item, Todd. I know I mentioned earlier in the discussion that the management of our indirect labor is a significant area where we can still find improvements in EBITDA, and it's something that we're actively looking at.

Dan Hilton: Maybe just to tack on one more item, Todd. I know I mentioned earlier in the discussion that the management of our indirect labor is a significant area where we can still find improvements in EBITDA and something that we are actively looking at. One of the strategies that we are pursuing actually are to use some of the professionals that we have here in Canada to offset during the heavy demand times down in the Caribbean in the winter months.

Speaker #3: And one of the strategies that we're pursuing, actually, is to use some of the professionals that we have here in Canada to offset during the heavy demand times down in the Caribbean in the winter months.

Speaker #3: So, this has the benefit of taking advantage of the skilled people that we have working in professional services during the low season, and deploying them to aspects of the business where the demand is really high during the O&M components. It also gives the floor team a break from being in the Caribbean islands supporting our clients, and allows them to focus more on production, which is an area where there is a significant need to continue to grow.

Dan Hilton: This has the benefit of taking advantage of the skilled people that we have working in professional services during the low season and deploying them to aspects of the business where the demand is really high during the O&M components and giving the Florida team a break from being in the Caribbean island supporting our clients and being able to focus more on production, which they have a significant need to continue to grow.

Speaker #4: Okay, I appreciate the very full answer there, guys. Congrats again, and great quarter. Keep it up.

Todd Radons: Okay. I appreciate the very fulsome answer there, guys. Congrats again on a great quarter. Keep it up.

Speaker #3: Thank you.

Scott MacFabe: Thank you.

Speaker #2: Thanks, Todd.

Dan Hilton: Thanks, Todd.

Speaker #1: Thank you. And we have a follow-up question from Doug Jensen. Please go ahead.

Operator: Thank you. We have a follow-up question from Doug Johnson. Please go ahead.

Speaker #2: Hello, sorry. I must admit I'm surprised at the cheerleading by the two representatives of investment companies, who know—presumably, far more than I do—about corporate finance and everything.

Operator: Hello. Sorry. I must admit I am surprised at the cheerleading by the two representatives of investment companies who presumably know far more about corporate finance and everything than I do. I will just point that the stock closed yesterday at CAD 1.10. It is now down to CAD 0.89 just this morning based on the market interpretation of the results, which I would share. That is a 20% decline just this morning that the market is speaking compared to the apparent cheerleading of the two investment firm representatives. I will just repeat.

Doug Johnson: Hello. Sorry. I must admit I am surprised at the cheerleading by the two representatives of investment companies who presumably know far more about corporate finance and everything than I do. I will just point that the stock closed yesterday at CAD 1.10. It is now down to CAD 0.89 just this morning based on the market interpretation of the results, which I would share. That is a 20% decline just this morning that the market is speaking compared to the apparent cheerleading of the two investment firm representatives. I will just repeat.

Speaker #2: But I'll just point out that the stock closed yesterday at $1.10. It is now down to $0.89 just this morning, based on the market interpretation of the results, which I would share.

Speaker #2: That's a 20% decline just this morning. The market is speaking, compared to the apparent cheerleading of the two investment firm representatives. I'll just repeat.

Scott MacFabe: Doug, do you have a follow-up question?

Speaker #3: Can you have a follow-up question?

Speaker #2: Yes, I'm pointing out—so what comment do you have on the fact the stock is now down to $0.89, a 20% decline?

Scott MacFabe: Yes, I am pointing out, what comment do you have on the fact the stock is now down to CAD 0.89, a 20% decline?

Doug Johnson: Yes, I am pointing out, what comment do you have on the fact the stock is now down to CAD 0.89, a 20% decline?

Dan Hilton: Unfortunately, Doug, at the moment, we are concerned with the people on the call and trying to answer questions right now. We have not been following the stock in the background. If you have a question, we would be happy to answer it.

Speaker #3: Unfortunately, Doug, at the moment we're concerned with the people on the call and trying to answer questions right now. We haven't been following the stock in the background.

Speaker #3: If you have a question, we'd be happy to answer it.

Speaker #2: Yes, my question is: What comment do you have on the big decline of the stock this morning?

Dan Hilton: Yes, my question is, what comment do you have on the big decline of the stock this morning?

Doug Johnson: Yes, my question is, what comment do you have on the big decline of the stock this morning?

Speaker #3: I haven't seen it yet, Doug.

Dan Hilton: I haven't seen it yet, Doug.

Speaker #2: Well, it is. You could look. It's $0.89.

Dan Hilton: Well, it is. You could look. It's CAD 0.89.

Doug Johnson: Well, it is. You could look. It's CAD 0.89.

Operator: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Scott MacFabe for any closing remarks.

Speaker #1: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Scott McPhee for any closing remarks.

Speaker #2: Thank you, operator. Again, I appreciate everybody taking the time today to hear our update on Q3. We hope that we've answered your questions, and we look forward to future contact and a better report as we continue through the rest of the fiscal year in Q4.

Scott MacFabe: Thank you, operator. Again, I appreciate everybody taking your time out today to hear our update on Q3. We hope that we've answered your questions, and we look forward to future contact and a better report out continuing as we finish out the fiscal year in Q4. Again, thank you for your support and interest and your investment in the company, and we look forward to our next call with you all. Thank you.

Speaker #2: So again, thank you for your support, interest, and investment in the company. We look forward to our next call with you all.

Speaker #2: So thank you.

Operator: Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnect.