Earnings call transcript: EverGen Infrastructure misses Q4 2024 forecasts

EverGen Infrastructure Corp reported its financial results for the fourth quarter of 2024, revealing a significant miss on earnings and revenue expectations. The company posted an earnings per share (EPS) of -$1.02, falling short of the anticipated -$0.0433. Revenues also came in below forecasts at $3.16 million, compared to the expected $3.45 million. Following these results, EverGen’s stock dropped by 6.35%, closing at $0.63, near its 52-week low of $0.59. InvestingPro analysis reveals the company is currently operating with a significant debt burden and may face challenges making interest payments. Despite these concerns, InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels.

Key Takeaways

• EPS of -$1.02 missed the forecast of -$0.0433.
• Revenue of $3.16 million fell short of the $3.45 million projection.
• Stock price declined by 6.35% in pre-market trading.
• Renewable Natural Gas production nearly tripled in 2024.
• The company secured a $2 million ACT grant for Grow Tech.

Company Performance

EverGen Infrastructure saw substantial growth in its overall operations in 2024, with total revenue reaching $14.2 million, a 69% increase from 2023. The company reported an adjusted EBITDA of $2.9 million, marking a 363% rise from the previous year’s $800,000. These gains were primarily driven by a significant increase in Renewable Natural Gas (RNG) production, which nearly tripled year-over-year. According to InvestingPro data, the company maintains a gross profit margin of 68.48%, though it’s currently experiencing rapid cash burn. Discover 16 additional exclusive ProTips and comprehensive financial metrics with an InvestingPro subscription.

Financial Highlights

• Revenue: $14.2 million in 2024, a 69% increase from 2023’s $8.4 million.
• Adjusted EBITDA: $2.9 million, up 363% from $800,000 in 2023.
• Non-cash impairment charges: $12.2 million recorded.

Earnings vs. Forecast

EverGen’s EPS of -$1.02 was significantly below the forecasted -$0.0433, representing a substantial deviation from expectations. The revenue miss was less pronounced but still notable, with actual figures at $3.16 million against a forecast of $3.45 million. This performance marks a departure from the company’s historical trend of meeting or exceeding earnings expectations.

Market Reaction

Following the earnings announcement, EverGen’s stock fell by 6.35% in pre-market trading, closing at $0.63. This decline places the stock close to its 52-week low of $0.59, reflecting investor concerns over the earnings miss and its implications for future growth.

Outlook & Guidance

Looking ahead, EverGen anticipates continued increases in RNG and feedstock volumes, with a focus on optimizing facilities and deploying capital effectively. The company expects to deliver positive results in 2025 and beyond, with potential acceleration of project developments post-election. However, guidance revisions indicate a cautious outlook, with EPS forecasts for future quarters remaining negative. InvestingPro data shows analysts expect sales growth this year, with a consensus price target suggesting significant upside potential. For detailed analysis and expert insights, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Misha Zapman expressed confidence in EverGen’s strategic positioning, stating, "We consider ourselves fortunate to be one of the few issuers in this space who have been able to access capital in these challenging markets." He also highlighted the company’s strong working capital buffer, saying, "With a revamped platform and a healthy working capital buffer, we are poised to deliver in 2025 and beyond."

Risks and Challenges

• Facility downtime and operational interruptions could impact production.
• Challenging capital markets may limit future financing opportunities.
• The renewable energy sector’s regulatory landscape remains uncertain.
• Potential macroeconomic pressures could affect project timelines.

Q&A

During the earnings call, analysts inquired about the use of financing proceeds, which will be directed towards deleveraging liabilities, debottlenecking operations, and improving cash flows. The company also discussed the final stages of financing negotiations for Project Radius and addressed the impairment charges related to market capitalization reset.

Full transcript - EverGen Infrastructure Corp (EVGN) Q4 2024:

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Which will be answered following the presentation. As a reminder, this call is being recorded. Before we begin, I would like to direct all participants to our website at www.evergeninfra.com, where you will find a copy of the fourth quarter twenty twenty four earnings presentation. Please allow me to remind you that our discussion today contains forward looking statements.

Actual results may differ materially from results projected by those forward looking statements. Additional information concerning these factors is contained in the fourth quarter twenty twenty four management discussion and analysis. I will now turn the call over to Misha Zapman, Evergen Infrastructure’s Chief Executive Officer, to begin.

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Thanks, Laura, and thanks, everyone, for joining today. As you know, it was a very eventful year in spite of some significant operational and market headwinds. During the year, Fraser Valley Biogas achieved record RNG production and is approaching its design capacity since the expansion was completed in December of twenty twenty three. Revenues increased by 37% in Q4, and we achieved $14,200,000 of revenue in 2024 compared to $8,400,000 in 2023. This was primarily driven by the increased production at Fraser Valley Biogas.

As a result, we recorded a 69% annual increase in revenues compared to 2023. During the same annual period, we were able to nearly triple RNG production across our facilities, producing a total of 160,000 gigajoules compared to 63,000 in 2023. As a result, our adjusted EBITDA increased by 363% to $2,900,000 for fiscal year twenty twenty four compared to $800,000 for fiscal year twenty twenty three. While we did incur a significant net loss, this was entirely driven by the $12,200,000 in noncash impairment charges incurred at Sea to Sky Soils and Grow Tech. Summarizing the year, in spite of some operational headwinds, RNG volumes increased significantly across the platform as Fraser Valley Biogas continued to ramp up production and edge closer to design capacity of the facility, which resulted in a significant increase in revenues as well as EBITDA.

With our recently announced equity financing and reorganization, the company is now in a healthy position to inject capital into those facilities and deliver positive results going forward. The minimum $5,000,000 equity injection will underpin cash flow from core assets while also providing capital to continue to advance our development stage projects. We note we have also left room to increase the financing by an additional $2,000,000 for those who would like to participate at these levels. The financing will provide a shakeup at the board and management level with a new slate of directors coming on board along with an experienced operations team, which will complement the existing team Evergen already operations team Evergen already has in place. With a revamped platform and a healthy working capital buffer, we are poised to deliver in 2025 and beyond.

We consider ourselves fortunate to be one of the few which issuers in this space who have been able to access capital in in these challenging markets. To summarize, we made a lot of progress at Fraser Valley Biogas and achieved record production and continue to see RNG and feedstock volumes increase across our facilities. This is a trend we expect to see continue in 2025. While we did encounter some operational headwinds at our other facilities with our recently announced equity financing and reorganization, we believe we are in a healthy position to inject much needed capital into those facilities and deliver positive results going forward. I would like to thank all stakeholders for their continued support, and we’ll now turn it back to Laura for Q and A.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Thank you, Misha. Our first question here, can you go into a bit more detail on the use of proceeds for the financing?

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Maybe, Sean, you can you can cover that one.

Sean, Financial Executive, Evergen Infrastructure: Yeah. Thanks, Laura and Misha. So as Misha touched on earlier, the the previously announced private placement, which is expected to provide gross proceeds of up to $7,000,000, will be used to strengthen Evergen’s balance sheet primarily through deleveraging existing liabilities as well as debottlenecking operations to improve our operating cash flows at our existing core assets.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Thank you, Sean. Can you explain what the reason was for the impairment charge?

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Yeah. So, you know, this was a noncash impairment charge, primarily, you know, a function of mark to market and a bit of a reset given the state of our, of our market cap. So so, really, it was resetting, the the book value of our assets in relation to where where our market cap is today, and essentially reflecting historical volumes primarily at Sea to Sky soils, which is where the bulk of that $12,200,000 impairment charge, came from. And, you know, from there, we we believe we’ve we’ve we’ve set a book value now that is something we can grow from and expand upon, given performance at the facility over the last three years.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Can you provide an update on Pacific Coast Renewables and Grow Tech expansions?

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Yeah. So those can we’ve been as you know, we’ve been a bit capital constrained to advance those projects. Those those projects are still, being advanced. Pacific Coast Renewables, in particular, we recently achieved, the approval of the agricultural, advisory committee from the city of Abbotsford, which is really the final step for achieving or for receiving city support for the project. The next step is for the project to go, before the agricultural land, commission.

So that project is still moving forward. Obviously, this capital injection will facilitate the development of that project and and enable, you know, us being able to move move that forward. At Growtech, we announced the receipt of the, the ACT grant, the $2,000,000 grant at that facility, and those proceeds are gonna go towards achieving phase two. So we continue to advance, the development of phase two, as well.

Sean, Financial Executive, Evergen Infrastructure: I I I would just like to add that yesterday, the BC provincial government announced that it had introduced the renewable energy project streamline permitting act, to the legislative assembly, and that includes biogas projects. So we we would expect that if this act is passed, that it would help fast track the permitting process for Pacific Coast renewables.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Can you give an update on project Radius?

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Yeah. So, again, project Radius, it we’re we’re essentially in the final stages of negotiations with a financing party. We as you know, we ran a process, and, and ultimately narrowed it down to to to to one to one party or the final party. Obviously, given the political, sort of overhang with the election and, you know, that for the last six months, there the consensus up up until a couple months ago was that, you know, we were gonna get a a change in government. There was some uncertainty and some delay, around this financing because, we you know, there was just uncertainty as to what the what what the political environment was gonna be going forward for projects like this.

So, obviously, the the results of last of the election this week, are positive for for advancing project radius going forward and advancing projects like this in Canada.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Do you see volumes continuing to increase at Fraser Valley biogas?

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: So Fraser Valley biogas, obviously achieved record production in 2024. We achieved record production for the month of, for the month of March, and are looking at similar volumes for the month of April. We had slower months in January and February. There was some downtime, but, those have since been addressed. We also you know, the the intention of this the proceeds of this the financing are, to to, you know, to inject some capital, a little bit of capital into into facilities like Fraser Valley biogas with critical spare parts, some some some capital into the dry feed to to reduce downtime and and and ultimately increase volumes.

From a feedstock perspective, we’re delivering record feedstock into that into that facility. So we do in a long way of saying, we do anticipate volumes, RNG volumes and feedstocks volumes to continue to increase at Fraser Valley Biogas.

Laura, Moderator/Call Facilitator, Evergen Infrastructure: Thank you very much, Misha and Sean. That concludes our q and a section here. Again, thank you everyone for joining us today, and we hope you have a lovely day.

Misha Zapman, Chief Executive Officer, Evergen Infrastructure: Thank you, everyone.

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