Water and wastewater treatment company De.mem (ASX: DEM) has revealed a record September quarter, with company receiving its highest ever quarterly cash inflows of $3.7 million.
This was also added to with record customer orders of $4.5 million for water treatment equipment.
As a result of the positive quarterly cash influx, De.mem has updated its calendar year 2020 guidance, with the December quarter predicted to create another record.
The company now anticipates cash receipts for the 12 months to range between $15 million and $18 million – up from the previously advised $14-18 million.
De.mem’s highest ever quarterly cash receipts of $3.7 million were up 7% on the June period.
The majority of this ($2.4 million) came from recurring revenues from De.mem’s various segments including equipment leasing, operations and maintenance of water treatment facilities, and sales of equipment, chemicals, membranes, parts etcetera from its various group entities.
Adding to the positive quarter was a strong performance from De.mem’s recently acquired business Pumptech Tasmania – now renamed De.mem-Pumptech.
The newly acquired entity’s customer cash receipts were 22% higher in the September period at $1.13 million compared to $930,000 generated in the three months ending June.
De.mem attributed the new entity’s higher performance to successful integration, along with access to the wider De.mem group and product range including cross and upselling initiatives.
Forecasting all time high in full year cash inflows
De.mem is predicting another record in the December quarter – expecting around $4.5 million in cash receipts for the period.
As a result, the company anticipates its fully year 2020 cash inflows will substantially exceed FY 2019’s of $11.7 million and FY 2018’s of $10.2 million.
Road to positive operating cash flow
While cash inflows are continuing to reach new highs, De.mem reported its operating expenses were decreasing.
Operating cash outflows shrunk to $618,000 during the September quarter – down from $668,000 in the June period. The September quarter’s outflows were also much lower than the $998,000 recorded in the December quarter 2019.
As a result, De.mem now anticipates achieving sustainable positive cash flows on an annualised quarterly basis. However, due to COVID-19, De.mem has refrained from providing a precise time of when it will move into positive territory.
Despite COVID-19 challenges, De.mem chief executive officer Andreas Kroell said the company has never been in a better position.
Underpinning a positive 2021 will be continued diversification of revenue through customer segments geography and products.
“We are now expanding into high-growth segments such as food and beverage and the power sector,” Mr Kroell noted.
“Our trends towards positive operating cash flow continues, with some variations from quarter to quarter around timing, but the overall improvement in cash flow continuing.”
Mr Kroell added he believed the company’s strong balance sheet combined with solid investor support, recurring revenues, a stable customer base and diversified products and services will facilitate De.mem in its plans to become a market leader in industrial water treatment.