What I am looking forHere is what I am looking for, whether it gets answered tomorrow or at the AGM in June.
I have been a holder for a number of years. Four or five years ago and beyond, QST mostly sold equipment, with a small service tail as recurring revenue. That caused ‘lumpy’ revenue depending on the price of oil and the number of rigs drilling. Then they created a long-term rental program which not only created ‘recurring’ revenue, which is always better, higher margin, smoother revenue as well. For the customers, using QST equip went from CapEx to OpEx. Capital is always limited, and Operating budgets easier to fund. I could go back in their public announcements or quarterly reports, I recall they announced a number of larger, multi-year rentals. That’s why the stock went over $5.
Then COVID hit, and all of a sudden the rental revenue dropped off a cliff. I have a hard time believing that all of these large multi-year rental agreements ended March 2020.
So now QST has all these rental units depreciating on their books with no revenue, which is why the Cash and Cash Equiv didn’t drop much, but QST lost money in the last 2 years. As new rental contracts are now signed, the COGS is already on the QST books, and given depreciation schedules, might almost be completely written off, but hardly used…any new rentals will come with higher realized margins.
I will be looking for clarity on their new rental contracts and how healthy those contracts are.