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Greenlane Renewables Inc
Symbol GRN
Shares Issued 154,028,236
Close 2024-03-26 C$ 0.125
Market Cap C$ 19,253,530
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Greenlane Renewables loses $29.4-million in 2023

2024-03-26 16:25 ET - News Release

Mr. Ian Kane reports

GREENLANE RENEWABLES ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2023 FINANCIAL RESULTS

Greenlane Renewables Inc. has released its financial results for the fourth quarter and fiscal year ended Dec. 31, 2023. 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+. All amounts reported are in Canadian dollars and in accordance with international financial reporting standards (IFRS) unless otherwise stated.

Fiscal year 2023 highlights include:

  • Annual revenue of $57.8-million;
  • Gross profit of $12.4-million, gross margin before amortization of $14.4-million (25 per cent of revenue);
  • Operating loss of $13.2-million;
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $10-million;
  • Net loss and comprehensive loss of $29.4-million, including an impairment of intangible assets and goodwill charge of $14.4-million taken in the fourth quarter of 2023;
  • The company announced $42.5-million in new system sale contract wins, including a $35.3-million contract award in Q4 with a leading environmental services company in Brazil that is investing in a portfolio of landfill assets across the country to produce biomethane;
  • The company launched its new sector-focused Cascade product lines; a portfolio of optimized solutions for the RNG (renewable natural gas) industry;
  • The company entered into a collaborative agreement with ZEG Biogas e Energia SA to locally produce, market and sell one of Greenlane's largest and most popular biogas upgrading products (Totara+ water wash system) in Brazil. The agreement established a first-of-its-kind royalty-like revenue agreement for Greenlane.

Fourth quarter highlights include:

  • Revenue of $17.3-million;
  • Gross profit of $2.8-million, gross margin before amortization of $3.2-million (18 per cent of revenue);
  • Operating loss of $3-million;
  • Adjusted EBITDA loss of $2.3-million;
  • Net loss and comprehensive loss of $17.7-million, including an impairment of intangible assets and goodwill charge of $14.4-million;
  • Sales order backlog of $36-million as at Dec. 31, 2023;
  • Cash and cash equivalents of $11.8-million and no debt, other than payables, advance payment/performance bonding and standby letters of credit resulting from normal course operations, as at Dec. 31, 2023.

"In 2023, our focus was on preparing the business for further growth, scaling and positive adjusted EBITDA in 2024," declared Ian Kane, president and chief executive officer of Greenlane. "We continue on this journey of business foundation building and are happy with our progress to date. We have invested in and implemented processes and systems to enable us to achieve this scaling sustainably. We are transitioning from an engineered-to-order to a configured-to-order business model, emphasizing standard products to streamline our costs and enhance our competitiveness in the market. This accelerates our ability to increase the sales pipeline, revenue, and enhance our bottom line."

"Focusing on the fourth quarter of 2023, gross margins were lower, largely associated with three of the company's active projects that experienced additional commissioning and other costs," noted Monty Balderston, chief financial officer of Greenlane. "Furthermore, the company commenced work on its $35.3-million sales order announced in October which was secured at a lower margin than the company's historical run-rate. The company also recorded an impairment of intangible assets and goodwill charge in Q4 of $14.4-million, which removes the remaining balance sheet value of our 2019 biogas upgrading business acquisition and is reflective of Greenlane's current enterprise value."

Mr. Kane added: "As we mature our business, we have prioritized cost management, are realigning our cost structure and focusing on efficiency in our supply chain execution. These efforts are expected to contribute to our goal of achieving positive adjusted EBITDA in 2024, as was achieved in 2021, and maintaining cash reserves. Our dedicated team, closely aligned with our customers, ensures the delivery of quality service and products. In 2023, we progressed 28 active biogas upgrading projects, demonstrating our team's experience and capacity. This puts us among the global industry leaders, and with a broad variety of solutions and configurations that is unparalleled. I am confident and excited about our strong future, considering the foundational work we have done and continue to do.

"The RNG market is maturing, and customers are becoming more sophisticated, shifting toward both larger projects and larger portfolios of projects, and this is influencing how we are orienting our business model going forward. Our sales funnel is robust, giving us confidence in our approach, and we are particularly excited about Brazil and North America, with extensive interest from multiple repeat customers and new customers. For example, the collaboration agreement that we entered into last year with ZEG Biogas to establish industrial-scale volume production locally in Brazil is structured to provide revenue under a new royalty-like business model together with service contracts. This, combined with the transition of our business model emphasizing product standardization and cost streamlining, should assist our gross margin improvement efforts. Furthermore, we maintain cash reserves and have no debt."

The market outlook

For the first time in the International Energy Agency's (IEA) renewable energy market report series, the IEA dedicated a special section to biogas. The IEA Renewables 2023 report notes that biogas production began to grow in the 1990s and has been rising since, but policy support surged strongly in the last two years. The report goes on to say, in view of the urgent need to limit global temperature rise to 1.5 degrees, countries have begun to view biogas as a ready-to-use clean domestic energy source that can help accelerate decarbonization in the short term, and they are therefore developing specific policies that include biogas as a key component in their energy transition strategies. The report further notes that biomethane can be used to decarbonize hard-to-electrify sectors such as transport and industry and that both biogas and biomethane use reduces not only CO2 emissions from fossil fuel combustion but also when correctly managed, methane emissions from the waste and agriculture/livestock sectors (responsible for 60 per cent of anthropogenic global methane emissions). This advantage aligns well with the emissions reduction objectives of the Global Methane Pledge launched in 2021 and signed by 155 countries (as of January, 2024). Specifically for the U.S. market, the IEA forecasts biogas and RNG volumes to grow 2.1-fold over the next five years, with the new RFS set rule, LCFS incentives and projects currently under development cited as catalysts.

The California Air Resources Board (CARB) recently proposed amendments that include steep CI reduction targets to the state's Low Carbon Fuel Standard (LCFS) requirements. Highlights of these proposed amendments include increasing the 2030 carbon intensity reduction compliance target from 20 per cent to 30 per cent and 90 per cent by 2045 and encouraging dairy/swine projects to break ground before 2030 to be eligible for up to 30 years of crediting.

In February, the United States Treasury Department and Internal Revenue Service issued a technical correction to the notice of proposed rulemaking (NPRM) issued last November concerning proposed changes to the Section 48 investment tax credit (ITC) in the Inflation Reduction Act (IRA). The correction is intended to make clear that cleaning and conditioning equipment critical to processing biogas into renewable natural gas is eligible for the ITC and is expected to facilitate RNG deployment to maximize the benefits of methane capture and recycling.

New Mexico became the fourth state to pass a clean fuel standard, joining California, Oregon and Washington. This development is further evidence that states are gaining traction against combating climate change while encouraging good-paying jobs that support the clean fuels industry. Clean fuel standards are market-based policies designed to reduce carbon emissions in the transportation fuel mix while promoting increased investment in producing renewable fuels and vehicles.

Conference call

The public is invited to listen to the conference call in real time by telephone. To access the conference call by telephone, please dial: 1-800-319-4610 (North America toll-free) or 1-604-638-5340. 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 audio file.

About Greenlane Renewables Inc.

Greenlane is driving change: accelerating the energy transition to a net-zero emissions economy. It is 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, Greenlane hase been actively contributing to the decarbonization of the planet for over 35 years. The systems it provides transform biogas generated from organic waste into high-value grid-ready renewable natural gas (RNG). The company's 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: water wash, pressure swing adsorption and membrane separation, plus proprietary biogas desulphurization 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 desulphurization units.

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