~Greenlane continues drive for EBITDA results; realigns cost structure; and secures new service contracts~
Vancouver, British Columbia, Canada – August 7, 2024 Greenlane Renewables Inc. (“Greenlane” or the “Company”) (TSX: GRN / FSE: 52G / OTC: GRNWF) today announced its financial results for the second quarter ended June 30, 2024. For further information on these results please see the Company’s Condensed Consolidated Interim Financial Statements and Management’s Discussion and Analysis filed under the Company’s profile on SEDAR+ at www.sedarplus.ca. All amounts reported are in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS”) unless otherwise stated.
Second Quarter Highlights from Continuing Operations Include:
“We’ve seen robust sales for both our Airdep division and service business this quarter,” said Ian Kane, President and CEO of Greenlane. “Building on the success of our biogas desulfurization product line in Europe, we have delivered the first Cascade H2S units in North America. These product and service contract wins are helping drive our financial goals, valued by our stakeholders, as we shift into our next phase of market and related product development. The overall market backdrop for the biogas upgrading portion of our business, however, has been challenging. Our Adjusted EBITDA positive goal this year requires refilling of our biogas upgrading system Sales Order Backlog, and we have seen several project opportunities in the late stages of our sales funnel process experience delays associated with our customers’ final decisions to start construction. We continue to anticipate converting them into purchase orders soon. In the meantime, we’ve taken action to help reduce costs in the affected parts of our business.”
“The sales cycle for biogas upgrading systems is difficult to forecast which can create a challenge when projecting our results,” added Monty Balderston, CFO of Greenlane. “We continue to monitor our biogas upgrading system Sales Order Backlog and take proactive steps to manage the business. We understand this challenge and have purposely maintained our asset-light business model which allows for the organization to adapt to a cost structure which aligns with the business’ activity levels. Given that we have now successfully completed and closed seven upgrading system projects in the first half of this year, we have realigned resources and, subsequent to June 30th, have reduced our workforce by 18%. We estimate this realignment will reduce the Company’s cost structure by $1.0 million for the remainder of fiscal 2024. I want to thank our staff who helped us get this far and the remaining team who will continue to push Greenlane forward.”
“Greenlane’s Gross Margin before amortization for the second quarter of 2024 of 28% of revenue, or $4.1 million, benefited from the positive impact of $0.3 million related to the release of expired warranty provisions and $0.5 million from adjustments to current project warranty provision estimates based on historical experience,” added Balderston. “Excluding the warranty impacts, Gross Margin before amortization is 22%, which is in line with our first quarter 2024 financial performance (excluding royalty contract impacts).”
Contract Wins
Greenlane has been awarded four new service contracts for biogas upgrading systems it recently supplied to a number of large US-based RNG facilities. With 25 new biogas upgrading system projects recently completed or nearly completed, the Company is pursuing service contracts from this new installed base by the end of the year. The Company is generating profitable recurring revenue from securing these multi-year, multi-tiered service and maintenance agreements servicing these RNG facilities.
“Securing these new service contracts is a testament to the hard work and dedication of our service team,” added Ian Kane. “Our goal of acquiring multiple new contracts by year-end is ambitious, but achievable, as we continue to provide first class service and support to our clients. We are known for our large facility expertise where Greenlane services all facilities with variable gas flow rates, a helpful factor in winning these new contracts.”
Adding to the increase in service contracts, Greenlane has been able to increase activities in the North American market with its first Cascade H2S deliveries. The Company's ability to consistently deliver high-quality installations and secure long-term service agreements enhances its position as a trusted partner in the biogas upgrading industry. These installations span various locations and sectors, demonstrating the versatility and reliability of Greenlane’s products and related services. Each project has been executed with our industry-leading dedication, ensuring optimal performance and customer satisfaction.
The Market Outlook
The Canadian government has recently made positive strides with new measures to regulate methane emissions from Canadian landfills. Minister of Environment and Climate Change, Steven Guilbeault, has proposed regulations to reduce methane emissions from landfills in Canada, aiming to enforce control measures and enhance gas-recovery systems. The unified approach targets both public and private landfills receiving municipal waste. The proposed Regulations seek to reduce methane emissions from Canadian landfills by about 50 percent by 2030 (from 2019 levels). The proposed Regulations would contribute to Canada's commitment to reducing global methane emissions by at least 30 percent below 2020 levels under the Global Methane Pledge. Landfills are one of the key sectors served by Greenlane where its upgrading equipment removes impurities and separates carbon dioxide from landfill gas to create pipeline quality renewable natural gas.
In British Columbia and a positive driving force for RNG, FortisBC Energy Inc. (FortisBC) gas customers will have one per cent of their gas automatically designated as RNG. FortisBC is the first energy utility in North America to automatically designate RNG for customers. Today, more than 13,000 B.C. homes and businesses subscribe to RNG through FortisBC’s current voluntary RNG program. FortisBC will continue to offer the voluntary RNG program so customers can choose to designate up to 100 per cent of the gas they use as RNG, inclusive of the new one per cent blend.
Conference Call
The public is invited to listen to the conference call in real time by telephone today, August 7th, at 2:00 p.m. PT (5:00 p.m. ET). The public is invited to listen to the conference call in real time by telephone. To access the conference call by telephone, please dial: 1-844-763-8274 (North America toll-free) or +1-647-484-8814. Callers should dial in 5-10 minutes prior to the scheduled start time and ask to join the Greenlane Renewables conference call. For expedited access to the conference call, attendees can click HERE to use a registration link prior to the 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” 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 RSUs, impairment of intangible assets and goodwill, impairment of notes receivable, strategic initiatives, transaction costs and non-recurring items.
Reconciliation of net loss and comprehensive loss to Adjusted EBITDA from Continuing Operations:
| (in $000s) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Net loss and comprehensive loss from continuing operations | (416) | (4,354) |
| Add (deduct): | ||
| Exchange difference on translating foreign operations | (61) | (127) |
| Provision for income taxes | (41) | 293 |
| Foreign exchange (gain) loss | (158) | 832 |
| Other (income) loss | (647) | 20 |
| Finance income | (70) | (131) |
| Finance expense | 37 | 15 |
| Impairment of notes receivable | - | 1,068 |
| Share-based compensation | 250 | 182 |
| Amortization of office equipment | 54 | 86 |
| Amortization of property and equipment | 81 | 49 |
| Amortization of intangible assets | 142 | 482 |
| Adjusted EBITDA | (829) | (1,585) |
Note 3 - Greenlane continually provides an update on its biogas upgrading system sales opportunities that successfully convert into contractual agreements in its reported sales order backlog (“Sales Order Backlog”). Sales Order Backlog is a supplementary financial measure that refers to the balance of unrecognized revenue from contracted biogas upgrading system supply projects. The Company’s Sales Order Backlog is a snapshot in time which varies from period-to-period. The Sales Order Backlog increases by the value of new biogas upgrader system sales contracts and is drawn down over time as these projects progress towards completion with amounts recognized in revenue (by reference to the stage of completion of each contract). A typical biogas upgrading system sales contract has six stages of completion and a duration of nine to 24 months, and therefore annual and quarterly operating results will fluctuate as a result of the timing of contract related work. Sales Order Backlog does not include unrecognized revenue from contracts in connection with either Airdep or aftercare services, given the smaller individual contract value and shorter delivery duration. Sales Order Backlog also does not include unrecognized royalty revenue due to the inherent variable nature of the agreement.
About Greenlane Renewables
Greenlane is driving change: accelerating the energy transition to a net-zero emissions economy. We are cleaning up two of the largest and most difficult to decarbonize sectors of the global energy system: the natural gas grid and commercial transportation. As a pioneer and leading specialist in biogas upgrading, we have been actively contributing to the decarbonization of our planet for over 35 years. The systems we provide transform biogas generated from organic waste into high-value grid-ready renewable natural gas (“RNG”). Our systems produce clean, low-carbon and carbon-negative RNG from organic waste sources including agriculture (such as dairy and hog manure), water resource recovery facilities, food waste, landfills, and sugar mills. Greenlane is the only biogas upgrading company offering and actively deploying the three main upgrading technologies: waterwash, pressure swing adsorption, and membrane separation, plus proprietary biogas desulfurization technology. Greenlane has delivered over 145 biogas upgrading systems into 19 countries, including some of the largest RNG production facilities in the world, and over 160 biogas desulfurization units. For further information, please visit www.greenlanerenewables.com
For more information please contact:
Incite Capital Markets
Darren Seed / Eric Negraeff
Greenlane Renewables Inc.
Ian Kane, President & CEO
Ph: 604.493.2004
Email: IR@greenlanerenewables.com
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”, “will”, “would”, “likely”, “could”, “plan”, “expects” or “is expected to”,“believe”, “continue to”, “remains” or “continually”, “is pursuing”, “proposed”, “aiming to” 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: that the Company continues its drive for EBITDA results; that its Adjusted EBITDA positive goal this year requires refilling of our biogas upgrading system Sales Order Backlog; management’s expectations respecting converting project opportunities into purchase orders soon and its estimates that resource realignment will reduce the Company cost structure by $1.0 million for the remainder of 2024; that product and service contract wins are helping to drive the Company’s financial goals; that the Company continues to monitor its Sales Order Backlog and take proactive steps to manage the business; the Company is pursuing further sales of service contracts and management’s expectations that multiple new service contracts by year-end is achievable; that proposed regulation of methane emissions from Canadian landfills will achieve reduced methane emissions from Canadian landfills; and that FortisBC will continue to offer the voluntary RNG program. 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 regulatory developments in Canada, 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 risks relating to: that customers’ final decisions to commence construction may be delayed; the Company’s ability to win new contracts, and the timing and profitability of new contracts; the ability to realize anticipated costs savings; management’s efforts to monitor the Sales Order Backlog and take proactive steps to manage the business to achieve the desired outcomes; anticipated legislative changes and their implications for biogas upgrading equipment and the ability of legislation to affect the pace of growth and the flow of capital into the RNG industry; the plans, estimates and intentions of third parties in respect of intended transactions and activities to transition to clean energy; Greenlane’s financial performance, and 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 specialist in biogas upgrading and a trusted partner in the biogas upgrading industry. 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 January 4, 2024, all of which have been filed under the Company's SEDAR+ profile at www.sedarplus.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.
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Greenlane Renewables
110 - 3605 Gilmore Way
Burnaby BC
V5G 4X5, Canada.
IR@greenlanerenewables.com