Earnings call transcript: Greenlane Renewables sees Q1 2025 revenue rise, stock steady

Greenlane Renewables Inc. (NASDAQ:GRNNF), with a market capitalization of $21.09 million, reported its financial results for the first quarter of 2025, revealing a revenue of $7 million, slightly below the forecasted $7.8 million. The company posted an adjusted EBITDA loss of $1.1 million, widening from a $0.8 million loss in Q1 2024. Despite these figures, the company’s gross margin improved significantly to 40% from 26.5% in the same quarter last year. The stock remained unchanged at $0.09, reflecting a neutral market reaction. According to InvestingPro, the company’s stock has shown considerable volatility in recent trading sessions.

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Key Takeaways

• Q1 2025 revenue of $7 million, below the $7.8 million forecast.
• Gross margin improved to 40% from 26.5% YoY.
• Adjusted EBITDA loss increased to $1.1 million from $0.8 million YoY.
• Stock price remained steady at $0.09 post-earnings release.

Company Performance

Greenlane Renewables demonstrated resilience in its gross margin, which rose to 40% in Q1 2025 from 26.5% a year ago, despite a decline in total revenue. The company continues to face challenges with its adjusted EBITDA loss widening to $1.1 million compared to $0.8 million in the previous year. The sales order backlog stands strong at $21.2 million, indicating potential future revenue.

Financial Highlights

• Revenue: $7 million in Q1 2025, down from the forecasted $7.8 million.
• Gross Margin: 40%, up from 26.5% in Q1 2024.
• Adjusted EBITDA Loss: $1.1 million, compared to $0.8 million loss in Q1 2024.
• Cash Position: $16.2 million.
• Sales Order Backlog: $21.2 million.

Earnings vs. Forecast

Greenlane Renewables reported revenue of $7 million, missing the forecasted $7.8 million by approximately 10.3%. The adjusted EBITDA loss of $1.1 million also reflected a larger gap compared to the previous year’s loss of $0.8 million, indicating ongoing challenges in profitability.

Market Reaction

Following the earnings announcement, Greenlane Renewables’ stock price remained unchanged at $0.09. The stock has traded between $0.06 and $0.16 over the past 52 weeks, with InvestingPro data showing a YTD price return of 1.22%. The company currently trades at a low revenue valuation multiple, potentially presenting an interesting opportunity for value investors.

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Outlook & Guidance

Greenlane Renewables expects Q2 2025 royalty revenue to reach $3.3 million. The company remains optimistic about improving adjusted EBITDA results and is focusing on profitable revenue segments. Strategic partnerships and innovation in biogas technology are expected to drive future growth.

Executive Commentary

CEO Brad DeVille stated, "Our aim as a company is making renewable natural gas projects more accessible and scalable by solving the industry’s most challenging problems." CFO Stephanie Mason emphasized, "We remain focused on operational discipline and execution as we work to convert our backlog into profitable revenue."

Risks and Challenges

• Tariffs and market uncertainty in the U.S. pose challenges.
• The widening adjusted EBITDA loss highlights profitability concerns.
• Dependence on emerging markets may expose the company to geopolitical risks.
• The need for technological innovation to remain competitive in the renewable energy sector.

Q&A

During the earnings call, analysts questioned the company’s strategy for navigating the current macroeconomic environment and the growth potential in Canadian, Brazilian, and European markets. Executives highlighted the growth in the parts and service segment and reiterated their focus on profitable revenue streams.

Full transcript - Greenlane Renewables Inc (GRN) Q1 2025:

Darren See, Investor Relations, Moderator, Insight Capital Markets: Good afternoon, everyone. Welcome to the Greenlane Renewables first quarter twenty twenty five video conference. My name is Darren See, president of Insight Capital Markets responsible for investor relations at Greenlane. I’m joined today by Brad DeVille, Greenlane’s chief executive officer and Stephanie Mason, Greenlane’s chief financial officer. We’ll begin with prepared remarks followed by q and a which I will moderate.

Before beginning our formal remarks, we’d like to remind listeners that today’s discussion may contain forward looking statements that reflect the current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward looking statements. Greenlane Renewables does not undertake to update any forward looking statements except as may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company’s annual information form which has been filed with the Canadian securities regulators. Please feel free to submit any questions you have through our investor email address at @greenlanerenewables.com.

Now over to Brett.

Brad DeVille, Chief Executive Officer, Greenlane Renewables: Good afternoon and thank you everyone for joining us today. Let me begin by updating you on the execution of our 2025 strategic plan. In short, we are on track. As a reminder, I set out in my letter to shareholders earlier this year three pillars of Greenlane’s twenty twenty five strategic plan. Those include, one, continued sales growth in the most profitable segments of our business, including biogas desulfurization products, parts and service and technology licensing two, development of our compelling next generation landfill gas upgrading product line and three, improvement of profitability of our core upgrading systems segment.

Our aim as a company is making renewable natural gas projects more accessible and scalable by solving the industry’s most challenging problems. From a technology perspective, the most important problems that need solving are coming down the cost curve and climbing up the performance curve for biogas desulfurization and landfill gas upgrading technology. Every biogas project has hydrogen sulfide that must be removed. And, of the various feedstock sources for RNG production, in The Americas, Sixty to 70% of it is from landfill gas. We’ve solved the hydrogen sulfide removal problem with our biogas desulfurization product line that has set the standard in Italy and is increasingly being adopted in global markets.

The problem with today’s landfill gas upgrading technology is achieving low cost and high methane recovery at the same time when high levels of oxygen and nitrogen, which are commonly found in landfill gas, need to be removed. Greenlane is solving this problem by developing and bringing to market our next generation landfill gas upgrading product line that incorporates the content of new patent applications we filed in December. As we strive to advance the state of the art of technology in our industry, we are not only actively expanding our intellectual property portfolio, we are also deepening strategic partnerships and advancing plans to localize manufacturing in key markets, including The U. S. And Brazil, positioning us for long term growth and operational resilience.

During the current period of economic uncertainty driven by new and changing U. S. Tariffs, the focus of infrastructure investors in The U. S. Appears to be on optimization of the large number of RNG producing assets constructed over the last few years while taking a wait and see approach on new project starts.

In Canada, with the newly elected Liberal government, who campaigned in part on building a clean economy and tackling climate change, we are optimistic about new support for RNG projects. In Brazil, the new biomethane legislation under the Fuel for Future Law calls for a 20 fold production increase. In Europe, a market increasingly dominated by anaerobic digestion of agricultural residues, we see continued investor enthusiasm for biomethane and demand for our products and services. All of this bodes well for our strategy because our biogas desulfurization products and our parts and service offerings play an important role not only in new projects, but also in optimizing existing ones. And the time is now to be developing and bringing to market our next generation landfill gas upgrading product line.

I appreciate your continued support, especially given the short timeframe between our last call and today’s, and I look forward to keeping the public informed of our progress. Also, want to thank the Greenlane employees for their continued hard work, passion and drive for results. With that, I’ll now turn the call over to Stephanie.

Stephanie Mason, Chief Financial Officer, Greenlane Renewables: Thanks Brad and good afternoon everyone. As a reminder, all figures are in Canadian dollars unless otherwise stated and all comparisons are for the first quarter of twenty twenty five against the first quarter of twenty twenty four. As Brad noted earlier and I stated in our release, we are on track with our strategic plan for the year. In the first quarter, we delivered $7,000,000 in revenue and a solid gross margin of 40%, reflecting the shift in our focus to profitable revenue. During the quarter, we saw a $400,000 improvement in services and spare parts sales.

This was offset by a $10,700,000 reduction in system sales and a $800,000 reduction in revenue from royalty contracts in comparison to the same period last year. While we reported an adjusted EBITDA loss of $1,100,000 our $21,200,000 sales order backlog compared to $21,800,000 as at 12/31/2024 and strong cash position of $16,200,000 consistent with the cash position as at 12/31/2024 along with no debt underscore the strength of our fundamentals. Our gross margin in Q1 twenty twenty five of 40% improved from 26.5% in the first quarter of twenty twenty four, which is about a 1,400 basis point increase. This reflects the updated company strategy and was largely the result of a change in product mix and expired warranty provisions. The company has a portfolio of active projects at different stages of completion and at different gross margin levels.

As I noted, we reported an adjusted EBITDA loss in the first quarter of $1,100,000 versus a $800,000 loss in the first quarter of twenty twenty four. The company incurred an operating loss from continuing operations of $1,400,000 in Q1 twenty twenty five compared to a loss of $1,000,000 in Q1 twenty twenty four. Net loss and comprehensive loss from continuing operations in the first quarter was $1,000,000 compared to a loss of $800,000 in the comparative quarter of twenty twenty four. We maintain our optimistic outlook on the year and look to improve these adjusted EBITDA results. While there was no royalty revenue recognized from technology licensing contracts in Q1 twenty twenty five, advanced payments of $3,300,000 received under the technology licensing agreement with ZEG Biogas that are included in deferred revenue were considered fully earned in April 2025 and will be recognized as revenue at a gross margin excluding amortization of $2,800,000 in the company’s second quarter twenty twenty five results.

Further to my comment on the company’s sales order backlog of $21,200,000 the sales order backlog is a snapshot at one moment in time, which varies from quarter to quarter. The sales order backlog increases by the value of new system sales contracts and is drawn down over time as projects progress towards completion and amounts recognized in revenue. Note that sales order backlog does not include revenue from contracts in connection with services and spare parts, given their small individual contract values or royalties. We remain focused on operational discipline and execution as we work to convert our backlog into profitable revenue, grow sales in our most profitable segments and drive long term value for our shareholders. We look forward to keeping you appraised on our progress.

And with that, let’s go over to Darren for the Q and A.

Darren See, Investor Relations, Moderator, Insight Capital Markets: Thank you, Stephanie. Today’s negative adjusted EBITDA of $1,000,000 seems a bit out of line when compared to the last two sequential quarter results. What can you say about your continued drive to improve adjusted EBITDA off the back of today’s results?

Stephanie Mason, Chief Financial Officer, Greenlane Renewables: Yeah. So our results reflect our focus on profitable revenue streams. The negative adjusted EBITDA in q one is mainly driven by our decrease in revenue during the quarter. But while revenue went down, our gross margin improved and we also didn’t see the same incremental decrease in our operating loss. So this shows that our focus on generating profitable revenue and cost reductions is going ahead as planned.

And we also highlighted that in q two twenty twenty five, we’ll be recognizing 3,300,000.0 in royalty revenue from the technology licensing agreement with ZEG Biogas and that’s gonna provide a pretty positive impact on our EBITDA results.

Darren See, Investor Relations, Moderator, Insight Capital Markets: Thanks, Stephanie. And and follow on to the first question, we can when can we expect to see tangible growth in sales from the profitable segments of Greenlane’s business, including biogas desulfurization products, parts and service and technology licensing as communicated in your 2025 strategy?

Brad DeVille, Chief Executive Officer, Greenlane Renewables: Yeah. Maybe let me take that one. So great question, Darren. And we’re already seeing the growth of our prop the profitable segments in our business. Firstly, with the parts and service business, that’s grown q one in 2025 over the same period last year, about 23%.

And when we talk about the growth of the biogas, the sulfurization product line, we account for that in the the system system revenue on our in our books. So that’s really a function of mix. So Steph already talked about the focus on profitable revenue streams. So we’re seeing that already. That’s where we’re accounting accounting for it.

Darren See, Investor Relations, Moderator, Insight Capital Markets: And thanks, Brad. And how is management planning or navigating this currently uncertain, shall we say, and volatile macro environment particularly out of The US? You know, how is this current administration’s came to environmental policy, you know, impact ongoing projects in The US and or, you know, on potential projects here in 2025?

Brad DeVille, Chief Executive Officer, Greenlane Renewables: Yeah. I’ll I’ll take that one too. So, you know, I think, obviously, with the the movement and the in in putting the tariffs in place in The US, that’s caused a bunch of things, a bunch a bunch of actions. So one of the actions that we’re seeing in The US market is really investors, infrastructure investors. They don’t like uncertainty.

They’re taking a bit of a wait and see approach. But at the same time, they’ve got r and g producing assets. A ton of them were put in place over the last several years because there was a building boom in The US market for for RNG projects. So right now, the time is ripe for these same investors to do optimization of those those assets. So, you know, we believe we’re well positioned with our our services and our particularly our biogas sulfurization products to provide fast paybacks with minimal investment to help optimize those assets.

Now when it comes to legislation in The US, to be honest, we’re not seeing anything dysfunctional with the RFS, the renewable fuel standard. We’re seeing things take its course with the LCFS in California. There was already a bunch of activities in place by the ARB to enhance that program that would have the net result of driving up the credit pricing, which is a good thing for for RNG markets and and necessary to continue to drive the carbon reductions that we’re looking for in California. So those, you know, those things are all happening. They’re on track.

You know, I would say that right now, because there’s so many other priorities within the US administration that, you know, we’re not again, we’re not seeing anything negative happen on the RFS. It’s just kinda doing what it’s it’s been doing since, you know, 02/2005 when it was put in place. We should also think about, you know, the other geographies. So in Canada, you know, we just elected a new liberal government. That government was put in place, again, with, you know, real sense of building in Canada, creating the strongest economy of the g seven has been the tagline that we’ve heard.

That has a consequence for building energy infrastructure across Canada. So energy infrastructure is needed of all types. We know that in Canada versus The US, there is a bit of there’s still an adherence to climate change is important. The voters provided their opinions on that, so that matters. The US narrative on that is more energy dominance, and that’s okay because that means energy of all forms are embraced.

That’s what we heard from I was at, you know, some conferences over the last few weeks. Representatives from the US government commented on energy dominance being the theme, which means energy of all types. So bring bring that on, make sure that energy is available with the idea of The US being energy superpower. But that’s the same dynamic we’re seeing in in Canada as well, creating Canada as an energy superpower, energy of all types, including renewable natural gas. So we’re optimistic that we’ll see more supportive programs in Canada.

Of course, we just saw in Brazil the recent legislation supporting biomethane to drive a 10% greenhouse gas reduction. Already, that’s 1% for next year, and that’s gonna result ultimately in an estimated 20 fold increase in biomethane. And then lastly, you know, of course, Europe, there’s been a continued investor enthusiasm for the space, and we’re doing really well. As I mentioned, tying it back to your other question, seeing the growth of our biogas desulfurization products. Of course, we make those in Europe.

That’s the heart of the market for which we sell it. We’re taking that global and we’re seeing supportive legislation and support generally across all our markets.

Darren See, Investor Relations, Moderator, Insight Capital Markets: Great. Well, thank you, Brad. Thank you, Stephanie and as a reminder, please feel free to submit any questions you have to our investor email address at irgreenlanerenewables dot com. Thank you very much.

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