De.mem achieves 2020 revenue guidance, maiden positive cash flow

De.mem DEM ASX December 2020 quarterly water filter filtration
De.mem achieved its first-ever cash flow positive quarter on the back of a record 2020 calendar year.

Water treatment technology developer De.mem (ASX: DEM) has achieved its upgraded guidance for 2020 with the company hitting a new quarterly record and receiving $16 million in cash receipts for the year.

After a record September quarter, De.mem revealed an updated guidance for calendar year 2020 to $15-$18 million – up from the previous range of $14-$18 million.

Cash receipts for CY 2020 reached $16 million, which was a 36% increase on CY 2019 when De.mem received $11.7 million.

As well as hitting CY 2020 guidance, cash inflows for the December quarter 2020 reached a new all-time high.

They rose 53% to $5.6 million compared to the previous record-breaking September 2020 quarter.

The all-time high in cash receipts spurred De.mem into achieving its first cash flow positive quarter and closed out the December period with $544,000 of operating cash flow.

De.mem chief executive officer Andreas Kroell said he was “delighted” to report the company’s record performance for 2020.

“We ended the year with the achievement of several key milestones, including our first-ever cash positive quarter, record full-year cash receipts, locking in our structural shift to recurring revenues and stellar performance in our recently integrated businesses, particularly De.mem Pumptech (Tasmania).”

Improved revenue quality and diversification

Underpinning the growth is an increase in recurring revenue, with this segment accounting for 38% of total cash receipts in FY 2018 and rising to around 58% of all revenue in CY 2020.

Additionally, De.mem’s revenue from different regions “substantially improved”, with 90% of revenue in CY 2018 arising from Queensland, compared to CY 2020 where “substantial” revenue was generated out of Tasmania and Australia’s south east.

As well as geographical diversification, De.mem’s customer-base has expanded with the company shouldering into the food and beverage segment.

De.mem also continues to build on its product range with CY 2020 bringing with it the introduction of specialty chemicals aligned to its membrane technology portfolio.

The company’s diversification and record revenues was facilitated by strong performance of its 2019 acquisitions: De.mem Pumtech (formerly Pumptech Tasmania) and De.mem-Geutec (formerly Geutec Industrie-und Abwassertechnik).

Further growth expected in 2021

As 2021 advances, De.mem expects ongoing revenue growth bolstered by $3 million in revenue from water equipment sales carried over from 2020 and a further $10 million in recurring revenue.

“Record order intake during the second half of CY 2020 and our growing recurring revenues provide sufficient confidence in the continued growth in CY 2021, despite challenging global conditions due to the COVID-19 pandemic,” Mr Kroell noted.

“Our unique portfolio of hollow-fibre membrane technologies has gained a strong place in the market, which will generate further organic growth opportunities for De.mem.”

“We believe that our balance sheet strength, strong investor support, significant recurring revenues, stable and resilient customer base and one-stop shop offering position De.mem to emerge as a market leader in industrial water treatment,” Mr Kroell added.

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