Average Daily Volume (3-month): 7,354K
Issued and Outstanding: 15,697,437
Options: 3,635,000 (*NIL Warrants)
Fully Diluted: 19,332,437
Current Price: $1.07
Market Capitalization: $16.8 million
Insider Ownership: 2% - 299,370 (*2.71M MGMT Options in-the-money)
TTM Earnings: ($638,108)
TTM Revenues: $23.86 million
TTM Adj. EBITDA: $1.5 million
EV/Adj. EBITDA: 11x
P/E: 25.5x
P/S: 0.70x
Debt: $3.1 million
Cash: $2.38 million
Last Financing: 2012 - $1.03 million convertible debenture
Highlights - Biorem has shown some good underlying growth despite a down sales year in 2023 as backlog has hit an all time high of $54.5m with $8.2m of new orders in Q3 2023 (a $32.8m annual pace).
- Their new products are getting traction, highlighted by its dry scrubber technology.
- The company’s primary markets have a number of tailwinds behind them.
- Although on the surface the current valuation metrics may not be cheap, even a reversion to 2022 sales levels will improve these substantially
Award-winning products offering high return on investment. - Great share structure, with less than 16 million issued and outstanding, and hasn't raised capital since 2012.
- Low insider ownership.
- Strong shareholder base.
- Undiscovered.
What is Biorem?
Biorem is a nano-cap cleantech company based in Guelph, Ontario, Canada that utilizes advanced technology biofilters to remove odors, volatile organic compounds, hazardous air pollutants and conditioning for biogas renewable energy. The company was founded in 1990 and has now grown to 50 employees with distribution in 23 countries on every continent, primarily in North America but also in China, the Middle East, the Americas, and South Africa.
Biorem began with a business focused on bioremediation (thus the name Biorem), but there was not enough work to sustain a full-time operation, so they expanded into finding solutions to air pollution. This led to a specialization in biological media that address air quality, odour, and emissions. Biorem does the engineering, development, manufacturing, distribution, and setup of its products, along with performance monitoring, and after sale service. They utilize sub-contractors for some field work. Like many businesses, Biorem has a diverse global supply chain. There was a lot of dependence on China in their supply chain previously but with the difficulties associated with COVID along with some previous performance issues, the company has done some re-shoring in its supply chain.
Biorem has done over 1,800 installations in its history with its current annual rate running at between 75 and 100 projects per year. Their customer base covers municipal wastewater treatment plants, industrial applications (i.e. pet food, chemicals, agri-business etc.), solid waste management (i.e. recycling centres) and renewable energy (i.e biomass). Most of Biorem’s work comes from being part of larger bids for projects; according to management they have had a 38 to 46% win-rate over the last 12 years. The project size can vary from $50k to $6m in size but the average is around $350 to $400k. The nature of infrastructure projects gives Biorem good financial visibility.
Biorem has diversified into some physical solutions, with the introduction of its dry scrubbers product. Development of new products has taken Biorem between 3 and 5 years, so to see its new tech already generating revenue, most notably with a $5.5m initial order from the city of Toronto, is a good affirmation for its business development.
Industry / Market Overview
The rise of the climate change / environmentalism movement in the developed world has led to a lot of interest into solutions to addressing the environmental impact. This has led to anti-pollution and environmental solutions being more incorporated into all parts of the economy. Biorem management has estimated that the overall growth in odour control at between 4% and 7% CAGR, with the NA market estimated to grow to $1.6B by 2027 and the global market at $7.6B by 2027. As countries begin to become more developed, an emerging middle class has historically demanded cleaner air and water which makes the global market potentially much more lucrative going forward as more countries become developed. The offset to this is that there is a slow adoption curve for clean technologies as companies and governments take time to accept new technologies.
There is also an increasing proliferation of large-scale government programs being enacted in western economies, most notably in the US with the Inflation Reduction Act. Increased levels of immigration is taking place in these same economies, all of which require infrastructure to support it. These same markets are also requiring this infrastructure to be “green” in nature, providing a good tailwind for clean tech. There has not been much evidence of government austerity in recent decades which makes infrastructure a very steady market for companies bidding on government work.
Competition
There are a number of small clean tech companies around the world that are involved in a similar type business to Biorem, according to Zoominfo. The largest of these competitors would be Montair Process Technology BV, based in the Netherlands, who have a similar revenue profile to Biorem’s. It would seem to be a very fragmented industry, which is supported by Biorem’s decent win rate in its bidding processes.
Management / Board
Biorem’s management is structured with four key employees denoted on its website: CEO Derek Webb, CFO Douglas Newman, a Director of Operations focused on project management and a Director of Technical Services providing engineering, production, and procurement. With only 50 employees, it makes sense to have a lean management group.
This extends to the Board of Directors which only has three members. CEO Derek Webb serves as management’s voice on the Board. William White is a former president of Dupont Canada which brings a lot of expertise in industrials. Finally, Alex Gill brings a lot of experience dealing with governments, which are the key customer base for Biorem. Webb has indicated the company would consider expanding the Board when it finds a requirement to do so but Biorem’s management has a strong tendency towards fiscal discipline and capital allocation.
Webb owns 299,370 shares or 2% of the company but both he and CFO Douglas Newman have some very large option grants outstanding that are all in the money at the current share price which further invests them in the success of the company.
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