Mr. Peter Londa reports

TANTALUS SYSTEMS HOLDING INC. REPORTS FINANCIAL RESULTS FOR Q3 2021

Tantalus Systems Holding Inc. has released the financial results for the third quarter and nine months ended Sept. 30, 2021.

"In the third quarter of 2021, Tantalus achieved a number of important milestones. We not only witnessed our user community exceed 200 utilities by adding seven new utilities in the quarter, but we also launched our first commercially available predictive data analytics tool to improve the resiliency and reliability of electric distribution grids. In addition to our continued commercial success, we also closed our first prospectus-based financing to further strengthen our balance sheet in support of growth initiatives," said Peter Londa, president and chief executive officer of Tantalus.

Extreme weather continues to challenge the resiliency of distribution grids while the availability and accelerating adoption of electric vehicles and other distributed energy resources are stressing existing grid infrastructure. Coupled with investments being made by homeowners and businesses to install rooftop solar panels to reduce carbon footprints, the utility industry continues to confront an unprecedented number of challenges that require upgrades to distribution grids across North America.

"These challenges create urgency among utilities to transform their grids into digital networks that are capable of accessing granular data in order to gain situational awareness, as well as command and control of critical assets," said Mr. Londa.

To help utilities improve the resiliency of their grids by leveraging such granular data, the company commercially launched the Tantalus grid reliability analytic (TGRA) tool. TGRA accesses data from Tantalus's edge devices installed in meters and other grid equipment to help utilities detect anomalies in power quality that can lead to premature failure of critical assets and sustained outages. After launching the analytic tool in September, Tantalus quickly secured subscriptions to a software-as-a-service (SaaS) offering from six utilities within the company's existing user community. The tool is delivering quantifiable benefits to those utilities and will serve as the foundation for leveraging data captured by Tantalus's smart grid platform to help improve efficiency, reliability and sustainability.

"We are extremely pleased with our team's performance during the quarter despite witnessing the continuing impact of COVID-19 and global supply chain constraints for semiconductors and other electronic components. The global supply chain challenges directly correlated to backlog revenue being pushed out of Q3 and into future periods. Coupled with the absorption of costs associated with becoming a publicly traded company and the loss of the Canadian government's scientific research and experimental development (SR&ED) funding as a result of no longer being a private company, we delivered negative adjusted [earnings before interest, taxes, depreciation and amortization] for the first time in over four years. While it is unfortunate to see our streak of 18 consecutive quarters of delivering positive adjusted EBITDA come to an end, we remain confident that Tantalus is extremely well positioned to deliver next-generation smart grid solutions as the utility industry accelerates their investments to build the grid of the future," said Mr. Londa.

Q3 2021 and year-to-date financial summary

Financial information is reported by Tantalus in U.S. dollars unless otherwise specified and is presented in accordance with international financial reporting standards.

Key results for the quarter are compared with the same time frame in the previous year unless otherwise stated:

• Revenue was $8.5-million compared with $8.8-million for the prior year and $24.6-million during the first nine months of 2021 compared with $23.7-million for the same nine-month period in 2020.
• Gross profit of $3.6-million representing gross profit margin of 42 per cent for Q3 2021 decreased from the prior year of $4.1-million and 47 per cent due to the revenue mix and increasing costs associated with supply chain constraints and logistics. Gross profit reported for the first nine months of 2021 was $11.0-million, representing gross profit margin of 45 per cent compared with $11.3-million and 48 per cent for 2020.
• Core business operating expenses for Q3 2021 increased to $4.2-million compared with $3.2-million in the prior year and to $11.5-million during the first nine months of 2021 from $9.5-million for the same nine-month period in 2020 due primarily to increased public company expenses and loss of funding from the Canadian government's SR&ED program as a result of becoming a publicly traded company in 2021. On a comparative basis, excluding the impact of SR&ED benefits associated with being a private company in 2020, the variance between the operating expenses of the company is $4.2-million versus $3.4-million for the three months ended Sept. 30, 2021, and 2020, respectively, and $11.6-million versus $10.5-million for the nine months ended Sept. 30, 2021, and 2020, respectively.
• Adjusted EBITDA decreased to ($580,535) in Q3 2021 compared with $951,927 in the prior year and to ($459,710) for the nine months ended Sept. 30, 2021, compared with $1.8-million in 2020 with the decline due primarily to the incremental public company expenses incurred and the reduction in SR&ED funding in 2021.
• The company closed a $10.6-million (Canadian) overnight marketed financing on Aug. 12, 2021, which strengthened the company's balance sheet and positions Tantalus for additional organic growth, as well as strategic partnerships and merger-and-acquisition opportunities.
• The company had total assets of $32.9-million as at Sept. 30, 2021, inclusive of $14.6-million in cash, compared with $23.5-million as at Dec. 31, 2020, inclusive of $4.6-million in cash, with adjusted working capital as at Sept. 30, 2021, of $15.6-million compared with $3.5-million as at Dec. 31, 2020.

While the growth horizon remains favourable for Tantalus and is being bolstered by the United States' unprecedented Infrastructure Investment and Jobs Act, signed into law on Nov. 15, 2021, management is mindful of the continuing worldwide disruption to the availability of electronic components, particularly with respect to semiconductors. The COVID-19 pandemic continues to impact Tantalus through delays in project deployments, restricted access to in-person meetings with utilities as part of the sales process and delays in decision making by utilities that are assessing modernization plans.

Management continues to implement policies to prioritize the health and safety of its employees while maintaining regular interactions with customers. Similarly, management is navigating through the semiconductor shortage by implementing a number of strategies to mitigate the impact of supply chain constraints by building inventory of long-lead components, qualifying alternative component providers, increasing buffer stock and co-ordinating directly with its contract manufacturer.

The company will hold a conference call and webcast to discuss the financial results on Nov. 16, 2021, at 11 a.m. Eastern Time.

Conference call

Participant dial-in (toll-free):  1-866-807-9684

Participant international dial-in:  1-412-317-5415

Webcast:  at the Chorus Call website

Replay information

A conference call replay will be available until Nov. 23, 2021. The webcast will be available until April 15, 2022.

To access the conference call replay, please see details below.

United States toll-free:  1-877-344-7529

International toll:  1-412-317-0088

Canada toll-free:  1-855-669-9658

Replay access code:  10161714

Financial statements and management's discussion and analysis

Please see the unaudited interim consolidated financial statements and related management's discussion and analysis for more details. The unaudited interim consolidated financial statements for the three and nine months ended Sept. 30, 2021, and related MD&A have been reviewed and approved by Tantalus's audit committee and board of directors. For a more detailed explanation and analysis, please refer to the MD&A that has been filed on SEDAR and is also available on the company's website.

About Tantalus Systems Holding Inc.

Tantalus is a smart grid technology company that transforms aging one-way grids into future-proofed multidirectional grids that improve the efficiency, reliability and sustainability of public power and electric co-operative utilities and the communities they serve. Its solutions are purpose-built to allow utilities to restore power quickly after major disruptions, adapt to rapidly shifting consumer expectations and population shifts, innovate new solutions based on the adoption of distributed energy resources, and evolve their grid infrastructure at their own pace without needless cost or complexity. All this gives the user community the flexibility needed to get the most value from existing infrastructure investments while planning for future requirements.

We seek Safe Harbor.