Greenlane Renewables Announces Fourth Quarter and Fiscal Year 2022 Financial Results
~Company delivered 29% year over year revenue growth and consistent gross margins~
Vancouver, British Columbia, Canada – March 9, 2023 Greenlane Renewables Inc. (“Greenlane'' or the “Company”) (TSX: GRN / FSE: 52G / OTC: GRNWF) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2022. For further information on these results please see the Company’s Audited Consolidated Financial Statements and Management’s Discussion and Analysis filed under the Company’s profile on SEDAR at www.sedar.com. All amounts reported are in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS”) unless otherwise stated.
Fiscal Year 2022 Highlights Include:
- Record annual revenue of $71.2 million, an increase of 29% over $55.4 million reported in 2021.
- Gross profit of $14.9 million, Gross Margin1 before amortization of $16.8 million (24% of revenue).
- Net loss and comprehensive loss of $6.1 million.
- Adjusted EBITDA2 loss of $2.0 million.
- The Company announced $45.3 million in new system sale contract wins, including $11.4 million in contracts with a single customer for three new food waste-to-RNG projects across three US states, and two new contracts with a combined value of $13.5 million for the supply of its biogas upgrading technology for two landfill gas-to-RNG projects in South America.
- The Company committed to two investments totalling $1.8 million under its Deployment of Development Capital program to companies focused on developing RNG projects.
- The Company completed the acquisition of 100% of the outstanding share capital of Airdep for consideration of $12.1 million.
Fourth Quarter Highlights Include:
- Revenue of $17.0 million, similar to the $17.1 million reported in the fourth quarter of 2021.
- Gross profit of $3.2 million, Gross Margin1 before amortization of $3.3 million (19% of revenue).
- Net loss and comprehensive loss of $1.5 million.
- Adjusted EBITDA2 loss of $2.0 million.
- Sales Order Backlog3 of $27.7 million as at December 31, 2022.
- Sales Pipeline4 valued at over $900 million as at December 31, 2022.
- Cash and cash equivalents of $21.4 million and no debt, other than payables, advance payment / performance bonding and standby letters of credit resulting from normal course operations, as at December 31, 2022.
- The Company announced a $4.6 million contract win for the supply of a biogas upgrading system for a dairy manure RNG project in the western US.
On March 9, 2023, the Company announced a new contract valued at $7.2 million (US$5.4 million) for a food waste-to-RNG project in Ohio, United States. The contract is for the supply of an integrated sulfur removal and water wash system for upgrading biogas generated from food waste streams into pipeline-spec RNG for direct injection into the local natural gas pipeline network. The project is expected to annually process approximately 190,000 tons of organic food waste into 250,000 MMBtus (million Btus) of RNG.
|Three months ended Dec 31||Twelve months ended Dec 31|
|(in millions, except as noted)||2022||2021||% Change||2022||2021||% Change|
|Gross Margin1 before amortization||$3.3||$4.3||(23%)||$16.8||$14.1||19%|
|Gross Margin as % of revenue||19%||25%||24%||25%|
|Net loss and comprehensive loss||($1.5)||($1.1)||(34%)||($6.1)||($2.4)||(154%)|
|Sales Order Backlog3||$27.7||$43.0||(36%)|
|Cash & cash equivalents||$21.4||$31.5||(32%)|
“The Greenlane team delivered another year of record revenue in 2022, a solid accomplishment given some challenges in the RNG market in the US that emerged during the year,” said Brad Douville, CEO of Greenlane. “We see 2023 as a pivotal year for Greenlane as we actively diversify our global presence and invest in systems and processes that will allow us to scale the business. Our investments to grow in key international markets include strengthening local supply chains, employing local talent, and partnering with industry participants that have strong relationships locally within the region.”
“Last year began with strong RNG spot prices in the US, but as 2022 progressed, the prices declined. Prices for RNG from US dairy projects, a significant customer segment for Greenlane in recent years, were particularly hard hit with falling California LCFS credit prices due to a surplus of credits. At the beginning of 2022, spot prices for dairy-derived RNG were over $US115 per MMbtu, but by the end of 2022, the price had dropped to approximately $US70 per MMbtu. These factors, combined with inflationary pressures, rising interest rates and lack of clarity respecting the rules not yet issued under the Inflation Reduction Act (“IRA”) impacted our growth in the second half of 2022.”
“Having recognized that low LCFS credit prices may not achieve the GHG reductions they are looking for, the California Air Resources Board (“CARB”) has indicated that they will update their LCFS program including introducing more aggressive compliance targets for carbon intensity reduction by 2030 and beyond, with the objective to support continued investment in low carbon technologies. While we anticipate that these and other regulatory developments in the US will support RNG demand with improved economics for Greenlane’s current and future customers, we are also increasing our focus in other markets where we see growth opportunities.”
“Outside of North America, Greenlane continues to invest for growth in Europe, building on our acquisition in Italy in February 2022, and in South America by expanding our local presence. In 2022, 40% of our system sales revenue was generated outside of the US, versus only 14% in 2021. Our non-US system sales revenue in 2022 was from Canada (14%), Brazil (12%), Europe (11%) and other countries (3%).”
During the fourth quarter, Gross Margin before amortization was adversely impacted as compared to previous quarters on a percentage basis on one project by commissioning costs that were beyond our control and on another project scope changes that were not recoverable. Furthermore, in light of growth in 2022, the Company added staff, which weighed negatively on Adjusted EBITDA. “We are well capitalized with more than $21 million in the bank and are debt free,” said Monty Balderston, CFO of Greenlane. “We will continue to prudently manage our cash to maintain a stable financial footing.”
Greenlane continually updates its pipeline of active system sales opportunities (“Sales Pipeline”), which at December 31, 2022 was approximately $900 million. The Sales Pipeline represents visibility to a significant number of opportunities for which the Company provides a quote, and those opportunities that successfully convert into contract wins move into our sales order backlog (“Sales Order Backlog”). The Company’s Sales Order Backlog of $27.7 million as at December 31, 2022 is a snapshot in time which varies from quarter-to-quarter. The Sales Order Backlog increases by the value of new system sales contracts and is drawn down over time as projects progress towards completion with amounts recognized in revenue. A typical system sales contract (excluding Airdep product sales) has six stages of completion and a duration of nine to 18 months, and therefore annual and quarterly operating results will fluctuate as a result of the timing of contract related work.
The Market Outlook
In California, CARB is widely anticipated to change its greenhouse gas emissions targets this year, with implementation of the more aggressive decarbonization targets to take effect in 2024 and drive increased demand for Low Carbon Fuel Standard (LCFS) credits. Most recently, CARB hosted a public workshop to discuss those changes, with the majority of stakeholders that provided feedback supportive of a 30% carbon intensity reduction compliance target by 2030, a sharp increase from the current 20%. Based on modeling provided by CARB, the 30% reduction target could result in a meaningful price recovery of California’s LCFS credit program starting immediately and hitting its price cap by 2026, providing a strong catalyst for continued growth in RNG project development in the state.
Despite overall market turbulence, significant capital continues to flow into the RNG sector in both North America and Europe. Recently, Canadian RNG project developer Green Impact Partners, announced a strategic partnership with a global infrastructure investor that could represent up to $545 million in total investment in its development portfolio, including its flagship project, Future Energy Park in Calgary, Alberta. In Europe, Goldman Sachs has established a new business targeting biomethane projects across the continent, with an anticipated investment to exceed €1 billion over the next four years.
The public is invited to listen to the conference call in real time by telephone today, March 9th, at 2:00 pm PT (5:00 pm ET). To access the conference call by telephone, please dial: 1-888-396-8063 (North America toll-free) or 1-416-764-8652. Callers should dial in 5-10 minutes prior to the scheduled start time and ask to join the Greenlane Renewables conference call. Callers should dial in 10 minutes prior to the scheduled start time and ask to join the Greenlane Renewables conference call.
Shortly after the conference call, the replay will be archived on the Greenlane Renewables website and replay will be available in streaming audio and a downloadable audio file.
SPECIFIED FINANCIAL MEASURES
Management evaluates the Company’s performance using a variety of measures, including “Gross Margin before amortization”, “Adjusted EBITDA”, “Sales Pipeline” and “Sales Order Backlog”. The specified financial measures, including non-IFRS measures and supplementary financial measures should not be considered as an alternative to or more meaningful than revenue, gross profit or net income. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS. The Company believes these specified financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company. Management uses these specified financial measures to exclude the impact of certain expenses and income that must be recognized under IFRS when analyzing consolidated underlying operating performance, as the excluded items are not necessarily reflective of the Company’s underlying operating performance and make comparisons of underlying financial performance between periods difficult. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.
Note 1 - Gross Margin before amortization is a non-IFRS measure and is defined by the Company as gross profit before amortization of intangible assets and property and equipment.
Note 2 - Adjusted EBITDA is a non-IFRS measure and is defined by the Company as earnings before interest, taxes, foreign exchange, depreciation and amortization, as well as adjustments for other income (expense), value assigned to options and RSU’s granted, and strategic initiatives.
Reconciliation of net loss and comprehensive loss to Adjusted EBITDA:
|(in $000s)||Three months ended Dec 31||Twelve months ended Dec 31|
|Net loss and comprehensive loss||(1,490)||(1,109)||(6,062)||(2,382)|
|Exchange difference on translating foreign operations||(347)||(86)||557||(68)|
|Provisions for income taxes||(136)||(76)||16||(76)|
|Foreign exchange (gain) loss||(853)||20||(2,167)||184|
|Other loss (income)||37||2||37||(207)|
|Amortization of office equipment||79||91||447||329|
|Amortization of property and equipment||68||-||146||-|
|Amortization of intangible assets||58||306||1,739||1,242|
|Professional fees related to shelf prospectus and other matters||-||-||-||101|
Note 3 - Sales Order Backlog is a supplementary financial measure that refers to the balance of unrecognized revenue from contracted biogas upgrading system supply projects. The Sales Order Backlog increases by the value of new system sales contracts and is drawn down over time as projects progress towards completion with amounts recognized in revenue (by reference to the stage of completion of each contract).
Note 4 - Greenlane maintains a Sales Pipeline of prospective projects that it updates regularly based on quote activity to ensure that it is reflective of sales opportunities that can convert into orders within approximately a rolling 24 month time horizon. The Sales Pipeline is a supplementary financial measure. Not all of these potential projects will proceed or proceed within the expected timeframe and not all of the projects that do proceed will be awarded to Greenlane. Additions to the amount in the Sales Pipeline come from situations where the Company provides a quote on a prospective project and reductions to the Sales Pipeline arise when the Company loses a prospective project to a competitor, a project does not proceed or, where a quote in the Sales Pipeline is converted to Greenlane’s Sales Order Backlog.
About Greenlane Renewables
Greenlane Renewables is a pioneer in the rapidly growing renewable natural gas (“RNG”) industry. As a leading global provider of biogas upgrading systems, we are helping to clean up two of the largest and most difficult-to-decarbonize sectors of the global energy system: the natural gas grid and the commercial transportation sector. Our systems produce clean, low-carbon and carbon-negative RNG from organic waste sources such as landfills, wastewater treatment plants, dairy farms, and food waste streams. To the company’s knowledge, Greenlane is the only biogas upgrading company offering the three main technologies: waterwash, pressure swing adsorption, and membrane separation. Greenlane’s business has been built on over 35 years of industry experience, patented and proprietary technology, with over 140 biogas upgrading systems sold into 19 countries, including some of the largest RNG production facilities in the world, and over 140 biogas desulfurization units sold. For further information, please visit www.greenlanerenewables.com.
For more information please contact:
Incite Capital Markets
Eric Negraeff / Darren Seed
Greenlane Renewables Inc.
Brad Douville, CEO
Forward Looking Information Advisory –
This news release contains “forward-looking information” within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as “may”, “expect”, “likely”, “could”, “plan”, “expects” or “is expected to”, “is used to”, “potential”, “proposed”, “estimate”, “believe”, “continues to”, “remains” or “continually” or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions "may" or "will" happen or that current events or conditions will continue or be repeated. The forward-looking information contained in this press release, includes, but is not limited to: the contract for the anticipated supply of an integrated sulfur removal and water wash system, the fact that order fulfillment will commence immediately and that it is expected to generate approximately 250,000 MMBtus (million Btus) of pipeline-quality RNG each year; that the Company is diversifying globally and investing in systems and processes to scale the business; management’s expectations for regulatory developments in the US that support RNG demand including that the California Air Resources Board will introduce more aggressive decarbonization targets to take effect in 2024 and drive increased demand for Low Carbon Fuel Standard (LCFS) credits; that a 30% carbon intensity reduction target could result in a meaningful price recovery of California’s LCFS credit program starting immediately and hitting its price cap by 2026; that regulatory developments in the US will support RNG demand with improved economics for Greenlane’s current and future customers; management’s belief that the sales pipeline represents visibility to a significant number of opportunities that will, through the sales process, convert opportunities into signed contracts and move into the sales order backlog, which will be drawn down and the Company advances and completes projects to realize revenue; that significant capital continues to flow into the RNG sector. The forward-looking information contained herein is made as of the date of this press release and is based on assumptions management believes to be reasonable at the time such statements were made, including management's perceptions of future growth, that CARB will increase the 2030 carbon intensity reduction compliance target to at least 30%; that other regulatory developments in the US and other jurisdictions in which the Company conducts business will be favourable for the RNG industry; results of operations, operational matters, historical trends, current conditions and expected future developments, the state of competition in the RNG industry and competitors’ capabilities, that favourable legislative initiatives will have a positive impact on the pace of growth and the availability of financing in the RNG industry and will generate sales opportunities for Greenlane, as well as other considerations that are believed to be appropriate in the circumstances. While management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By their nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond Greenlane’s control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: the anticipated legislative changes and the ability of legislation to affect the pace of growth and availability of financing in the RNG industry; the plans, estimates and intentions of third parties in respect of intended transactions and activities to transition to clean energy; risks relating to Greenlane’s financial performance, Greenlane may not be able to convert sales opportunities into contracts as expected, Greenlane may face impediments in delivering and advancing projects to be able to timely realize revenue reducing the sales backlog; RNG initiatives and projects of natural gas utilities being changed, delayed or canceled, the state of competition in the RNG industry, Greenlane’s position as a leading biogas upgrading and project development solutions provider. Additional risk factors can also be found in the Company's Management Discussion and Analysis, its Annual Information Form and in its base shelf prospectus dated June 24, 2021, all of which have been filed under the Company's SEDAR profile at www.sedar.com. Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
FINANCIAL OUTLOOK INFORMATION – This news release contains “financial outlook information” regarding Greenlane’s prospective revenue and results, which is subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above. Revenue and other estimates contained in this news release were made by Greenlane management as of the date of this news release and are provided for the purpose of describing anticipated changes, and are not an estimate of profitability or any other measure of financial performance. Investors are cautioned that the financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein. The Company’s revenues are largely derived from a relatively small number of biogas upgrader orders accounted for on a stage of completion basis over typically a nine to eighteen-month period. Timing of new contract awards varies due to customer-related factors such as finalizing technical specifications and securing project funding, permits and RNG off-take and feedstock agreements. Some contracts contain termination provisions that allow the customer to terminate with no penalty or with minimum prescribed threshold payments based on the length of time since the contract was entered into. Some projects have built-in pause periods to allow customers to complete concurrent activities such as civil work. As a result, the Company’s revenue varies from month to month and quarter-to-quarter. THE COMPANY QUALIFIES ALL THE FORWARD LOOKING STATEMENTS AND FINANCIAL OUTLOOK INFORMATION CONTAINED IN THIS NEWS RELEASE BY THE FOREGOING CAUTIONARY STATEMENTS.
Neither the TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this release or has in any way approved or disapproved of the contents of this news release.