Mr. Brad Douville reports
GREENLANE RENEWABLES ANNOUNCES THIRD QUARTER 2021 FINANCIAL RESULTS
Greenlane Renewables Inc. has released financial results for the third quarter ended Sept. 30, 2021. For further information on these results, please see the company's condensed consolidated interim financial statements and management's discussion and analysis filed on SEDAR. All amounts are in accordance with international financial reporting standards.
Third quarter highlights include:
Record revenue of $13.4-million, an increase of 107 per cent over the $6.5-million reported in the third quarter of 2020;
Gross profit of $3.1-million and gross margin (gross profit excluding amortization) of $3.4-million (25 per cent of revenue);
Net income of $100,000;
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $100,000
Record sales order backlog (2) of $47.1-million as at Sept. 30, 2021;
Sales pipeline (3) valued at over $850-million as at Sept. 30, 2021;
Cash and cash equivalents of $35.6-million and no debt, other than payables and bonding resulting from normal course operations, as at Sept. 30, 2021;
The company announced new contract wins totalling $18.9-million for the supply of five biogas upgrading systems: the first for the supply of a new membrane separation biogas upgrading system for a project owned by an international energy company in the United States, followed by the supply of two PSA biogas upgrading systems for dairy farm RNG projects in the states of Wisconsin and New York developed and owned by a proven leader in the waste-to-energy industry, and finally a contract for the supply of two PSA upgrading systems for Green Impact Partners in the state of Colorado; order fulfilment on all five systems commenced immediately upon contract signing.
"As global leaders, scientists, financiers and negotiators descended on Glasgow, Scotland, for the COP26 United Nations climate change conference starting last week to hammer out solutions, the need to accelerate decarbonization and hasten the energy transition to renewables could not be more apparent. There is a growing recognition that there is no net zero without biogas and as much RNG as can be produced is needed. With these supportive fundamentals, Greenlane's growth has continued as the company delivered a fifth consecutive record revenue quarter exceeding 100-per-cent year-over-year growth and a record sales order backlog," said Brad Douville, president and chief executive officer of Greenlane. "Additionally, the company delivered a fourth consecutive quarter of positive adjusted EBITDA, which was against a backdrop of tightening labour markets and supply chain disruptions globally.
"Our sales pipeline continues to grow, which is a reflection of the ongoing expansion of the [renewable natural gas] industry and the increasing urgency to decarbonize global energy systems through immediate and proven technologies. Momentum continues to gather behind RNG as an attractive low-carbon and carbon-negative solution to displace diesel fuel in heavy-duty trucks and marine vessels and fossil natural gas in distribution networks fuelling homes, businesses and factories. Greenlane is solely focused on an RNG market that is rapidly expanding. Our expertise as the only global provider of the three main biogas upgrading technologies provides us with the unique ability to meet the needs of biogas projects around the world, no matter the size, feedstock type or pipeline injection specification. We are confident with our competitive position and are excited about the path ahead."
Greenlane continually updates its pipeline of active system sales opportunities, which at Sept. 30, 2021, was over $850-million. The sales pipeline represents visibility to a significant number of opportunities that funnel down through the company's sales process, and those opportunities converted into contract wins move into the company's sales order backlog. The company's sales order backlog (2) of $47.1-million as at Sept. 30, 2021, is a snapshot in time, which varies from quarter-end to quarter-end. The sales order backlog increases by the value of new system sales contracts and is drawn down over time as projects progress toward completion with amounts recognized in revenue. The company's gross margin in the quarter was 25 per cent ($3.4-million). Going forward, gross margin is expected to continue to be in the range of 25 per cent to 30 per cent on an annual basis.
The market outlook
Out of the COP26 UN climate change conference in Glasgow last week came a milestone announcement, which highlights the commitment of world leaders to influence change and reduce the carbon footprint of the global community. More than 100 countries representing 70 per cent of global GDP signed the global methane pledge to collectively reduce methane emissions by 30 per cent by 2030 from 2020 levels. Methane is one of the main causes of climate change, and reducing emissions is one of the fastest methods of effecting positive change for example by capturing methane containing biogas from landfills and other sources of biomass and upgrading it to valuable RNG before it can escape into the environment.
Another important outcome from COP26 was the announcement that over $130-trillion of private finance is now committed to science-based net zero targets and near-term milestones, through the Glasgow Financial Alliance for Net Zero, led by former Bank of England governor Mark Carney. Analysis, commissioned by the UN high-level climate action champions, finds that the private sector could deliver 70 per cent of total investments needed to meet net zero goals.
The company continues to see increasing activity in RNG from the global energy supermajors. Chevron announced in September a tripling of its investment to $10-billion to reduce its carbon emission footprint through 2028, including $3-billion earmarked for renewable fuels. Chevron has also announced the creation of a joint venture with Mercuria Energy Trading, one of the world's largest independent energy traders, to own and operate a network of 60 compressed natural gas (CNG) stations across the United States. The creation of this joint venture will allow Chevron to rapidly expand its renewable natural gas value chain, complementing its previously announced plan to open more than 30 Chevron-branded CNG stations by 2025 as the company seeks to increase its RNG volumes tenfold by 2025.
Shell recently announced that it is now producing RNG from its first biomethane facility in the United States as the company expands its portfolio of low-carbon-intensity fuels for use in heavy-duty transportation. Shell is also developing additional RNG production facilities to be located directly within operating dairies. Shell Downstream Galloway at the High Plains Ponderosa Dairy in Kansas and Shell Downstream Bovarius at the Bettencourt Dairies in Idaho are part of this expanding portfolio, using cow manure as feedstock. Together, these two facilities can produce approximately 900 billion British thermal units a year of negative-carbon-intensity RNG.
Repsol, the large Spanish integrated energy company, has produced renewable hydrogen using biomethane as a raw material for the first time, obtained from urban solid waste. Repsol is replacing conventional natural gas with biomethane of sustainable origin to produce renewable hydrogen in its industrial complexes, therefore decarbonizing its processes and products.
Seaspan Ferries became the first Canadian marine company to pilot the use of RNG to reduce greenhouse gas emissions produced by its roll-on roll-off LNG (liquefied natural gas)-powered marine fleet. Seaspan anticipates that by using RNG, greenhouse gas emissions can be reduced by upward of 85 per cent versus traditional diesel fuel. Using RNG for marine LNG has the potential to be an emission game changer for the sector and is yet another example of how renewable gas development is transforming natural gas infrastructure into a delivery system for carbon-neutral energy.
In Brazil, Petrobras signed a co-operation agreement with ZEG Biogas for the joint development of the biomethane market in the country. The objective is to promote the growth of the biomethane market in Brazil, providing producers with technological solutions for the manufacture of biomethane from byproducts that originate from the production of ethanol. The company believes that the potential market for the product in Brazil is over 10 billion cubic metres per year, which is equivalent to one-third of the current demand for natural gas in the country.
The public is invited to listen to the conference call in real time by telephone at 2 p.m. PT (5 p.m. ET) on Nov. 9. To access the conference call by telephone, please dial: 1-855-327-6838 (Canada and United States toll-free) or 604-235-2082. Callers should dial in five to 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 MP3 file.
NOTE 1 -- RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
Three months ended Sept. 30, 2021 Three months ended Sept. 30, 2020
Net income $52 $743
Share-based compensation 295 152
Depreciation and amortization 396 383
Finance expense 9 101
Other income - (1,777)
Foreign exchange (gain) loss (669) 199
Other adjustments -- bonus accrual - (161)
Adjusted EBITDA income (loss) 83 (360)
Note 2 -- sales order backlog refers to the balance of unrecognized revenue from contracted projects. The sales order backlog increases by the value of new system sales contracts and is drawn down over time as projects progress toward completion with amounts recognized in revenue (by reference to the stage of completion of each contract).
Note 3 -- 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. Not all of these potential projects will proceed or proceed within the expected time frame 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 pipeline is converted to Greenlane's sales order backlog.
All filings related to the third quarter ended Sept. 30, 2021, are available on SEDAR.
About Greenlane Renewables Inc.
Greenlane Renewables is a leading global provider of biogas upgrading systems that is helping decarbonize natural gas. Its systems produce clean, low-carbon and carbon-negative renewable natural gas from organic waste sources, including landfills, waste water treatment plants, dairy farms and food waste, suitable for either injection into the natural gas grid or for direct use as vehicle fuel. Greenlane is the only biogas upgrading company offering the three main technologies: waterwash, pressure swing adsorption and membrane separation. With over 30 years industry experience, patented proprietary technology and over 125 biogas upgrading systems sold into 19 countries worldwide, including the world's largest biogas upgrading facility, Greenlane is inspired by a commitment to helping waste producers, gas utilities or project developers turn a low-value product into a high-value renewable resource.
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