Earnings call transcript: NorthStar Q4 2024 sees revenue growth, stock dips

NorthStar Clean Technologies reported a significant increase in revenue for fiscal year 2024, reaching $640,000, up from $206,000 in 2023. Despite this growth, the company’s stock saw a slight decline of 3.03% to close at $0.33. According to InvestingPro data, the stock has delivered an impressive 62.5% return over the past year, with a current market capitalization of $31.73 million. The company continues to focus on expanding its innovative shingle recycling technology, with plans to open new facilities and license its technology. The market’s response, however, reflects some uncertainty as the company transitions from development to deployment.

Key Takeaways

• NorthStar’s revenue increased by over 200% year-over-year.
• Cash reserves grew to $10.2 million, supporting future expansion plans.
• The company completed its first facility construction in Calgary, aiming to begin operations by mid-2025.
• Stock price fell by 3.03% following the earnings announcement.
• NorthStar plans to build and license multiple facilities annually.

Company Performance

NorthStar demonstrated robust growth in fiscal year 2024, driven by its pioneering shingle recycling technology. The company’s revenue rose significantly, reflecting increased market interest and operational advancements. Despite the positive financial performance, the stock’s decline suggests investor caution as the company transitions from technology development to facility deployment.

Financial Highlights

• Revenue: $640,000, up from $206,000 in 2023
• Cash Balances: $10.2 million, increased from $7.6 million
• Total Funds Raised: Over $28 million, mostly non-dilutive
• Comprehensive Loss: $9.3 million, compared to $6.7 million in 2023

Outlook & Guidance

NorthStar aims to build and license 3-4 facilities annually, with each facility expected to generate $5-10 million in revenue. The company is targeting a facility capacity of 80,000 tons, aligning with its strategy to divert significant amounts of shingle waste from landfills. The Calgary facility is anticipated to be operational by mid-2025, marking a crucial step in NorthStar’s commercialization efforts.

Executive Commentary

"We’re literally six to eight weeks away from demonstrating that this is not a technology story anymore, but a deployment story," stated Aiden, a company leader, highlighting the shift from development to operational execution. Greg Finnefin, Financial Officer, emphasized the financial strategy by noting, "During 2024, NorthStar through various vehicles raised over $28,000,000 the majority of which were non-dilutive to existing shareholders."

Risks and Challenges

• Market Uncertainty: The transition from development to deployment may pose operational challenges.
• Competitive Landscape: As a first-mover, NorthStar faces potential competition from emerging technologies.
• Regulatory Changes: Potential impacts from environmental regulations and tariffs.
• Supply Chain: Ensuring the timely supply of materials for new facilities.
• Economic Conditions: Broader economic factors could affect investment and expansion plans.

Full transcript - Northstar Clean Technologies Inc (ROOF) Q4 2024:

Aiden, Company Leader/Executive, NorthStar: everybody, welcome to the q four twenty twenty four and full year twenty twenty four financial results, and investor update. As usual, came same kind of admin as we’ve done over over the last, few quarters. So please, put your questions in, and we’ll pick those up as we as we go along, and then we will have the team ask the questions at the end. And so, yeah, with and we plan, of course, is to is to take you through where we are with the financials and the results, obviously, that came out with the press release this morning and do an investor update. So without any further ado and, obviously, of course, forward looking statements, we will be making forward looking statements, and this is obviously the disclaimer with respect to that.

And now I’ll hand it over to Greg Finnefin to take us through the financials. Greg?

Greg Finnefin, Financial Officer, NorthStar: Thanks, Hayden. Good afternoon, everyone. This represents my first Northstar earnings call with the markets. I’m honored and privileged to be part of the team, and I look forward to many, many more of these calls with you as we begin to post operational results. Just a few financial highlights for me that occurred during the 02/2024 fiscal year prior to handing it back over to Aiden.

Two thousand twenty four represented a significant year in the capitalization and funding of the company, the proceeds of which served a multifold purpose. One, funding construction efforts on the inaugural Calgary facility. Two, providing capital dedicated to sourcing, analyzing and securing future sites as part of the exciting growth plan for the company and three, funding the operations of NorthStar itself. Cash balances at the end of fiscal twenty twenty four were $10,200,000 compared to $7,600,000 at the end of fiscal twenty twenty three. During 2024, NorthStar through various vehicles raised over $28,000,000 the majority of which were non dilutive to existing shareholders.

Together with receipts from government agencies, the company received nearly $30,000,000 in cash to fund the business. The majority of these funds were dedicated to the construction during 2024, as I mentioned, of the Calgary facility. The company recorded $19,000,000 in capital expenditures and $1,500,000 in deposits paid for existing facilities during fiscal twenty twenty four. ’20 ’20 ’4 also represented an important year from the perspective of generating increased revenues from tipping fees. Revenue for 2024 was $640,000 compared to just $206,000 for fiscal twenty twenty three.

As has been communicated in various press releases, we anticipate commencing full operations in mid-twenty twenty five and as such quarterly results reflect material increases in revenue and operations. From a cost perspective, cash expenses for the year totaled $4,800,000 as compared to $4,100,000 for the prior year. The increase is due to additional personnel and a broader scope in operations for the business. Research and development expenses were nil for the period compared to $778,000 for fiscal year twenty twenty three. As the company evolved from pilot operations to full commercial operations, requirements for R and D diminished.

Having said that, we would anticipate only minor amounts to be spent on R and D going forward as we fine tune operations and perform product testing for specific future markets. Comprehensive loss for the period was $9,300,000 compared to $6,700,000 for fiscal twenty twenty three. As the company moves to full fledged operations and anticipated profitability, these losses will be used to significantly shelter income from taxes. We forecast our tax payable horizon, assuming our stated growth plans for plants to be several years into the future, thereby leaving more cash in the business itself to fund growth and in turn minimize dilution to existing shareholders. One final note for me, we included a more detailed analysis of our issued and outstanding and fully diluted share capitalization in our management discussion and analysis to aid current and potential shareholders understand the somewhat complex capitalization of the company.

Assuming all existing securities that are issued and that could be issued upon conversion of certain debentures are in fact converted, NorthStar would have an outstanding share base of $274,000,000 shares, but would bring in an additional $20,000,000 in proceeds upon various securities being exercised. I would welcome any questions as part of the q and a. But for now, Aidan, back over to you.

Aiden, Company Leader/Executive, NorthStar: K. Thanks, Greg. That’s great. And great to have, Greg on board and, you know, great, great performance as we got through the the the audit, which is always a heavy lift for the finance team. So so great to have that team here delivering that.

Okay. So investor update. So look. We chatted about this as we came into the year that there were kind of three objectives that we had for for 2025. So the first one was to deliver the Calgary facility, and ensure we were up and operating by by kind of middle of the year.

The second was to to develop the twenty twenty six sites such that we could start construction, in in 2026. And then the last thing was obviously to to develop a portfolio, so that we could really identify, you know, at least the next 10 facilities or next 10 locations, for us to start to start the development work in it. Because, obviously, you know, permitting, you know, the the earlier you can identify areas, start to secure supply, and and start the permitting process, the the better. So with the key deliverables, I’ll I’ll gonna talk through most of these in the, in in the next slides, but, obviously, all of them, you know, align with those three objectives. And I think it’s also worth reflecting just at the end of at the end of the at the end of the year kind of, like, what we actually delivered in in kind of 2024.

So, you know, the the the the left hand side are all the things that we think are are important with respect to, you know, where where are we with the strategic offtake customers, where are we with strategic investors, etcetera. And if you look at the highlights that we had for 2024 was a fairly barnstorming year. You know, obviously, discussions ongoing with Hamilton and US one, you know, secured 14,000,000 from our partners at CVW. You know, 1.8 came in from Tamco and the completion of of of one of the, you know, one of the ERA funding stages. We had ERA come in for the first milestone we delivered on on milestone one.

We had 2,250,000.00 come in from strategic Calgary Investors, including, the Chew family with Patrick joining the board. You know, we had we secured feedstock supply for Calgary. We started you know, we identified exactly where the first TAMCO facility to be to to be supplied was. And remember with that with the TAMCO investment as well, so we extended the number of of sites that Tamco will take from three to four with the extension of the MOU. So all of that, you know, lays a phenomenal foundation for for for stepping into The US.

I’m actually at the at the at the, Planet Microcap investor conference in Vegas, you know, today, and one of the key points that I’ve been making to investors here is this is you know, this, if you think about the 16 and a half million tons going into landfills or destined for landfills across North America, you know, about one and a half of that is in in Canada and and, you know, 15 in The US. So so really understanding as we develop this portfolio what The US options look like is is absolutely critical. So, you know, we started to to draw the on the BDC loan. We had the, as I said, milestone one payment come in from from ERA. And most importantly, we started construction during 2024 on the Calgary facility.

You know, we’ve been set putting out the construction videos, and we’ll talk about that in in a little bit more detail later. But but, yeah, obviously, an important a very important milestone for for the company. You know, technology continues to go, so r and d work is is is continuing, is continuing to develop. The IP, you saw most recently that we added the, another patent for for for Canada. And with respect to emissions, the measurement and monitoring, protocol that we have to adhere to with the emissions reduction Alberta work has already been kicked off, and and we’ve we’ve been doing measurements through through commissioning.

So, you know, like, we always talk about what are the what are the fundamentals of the business and what what are the foundation. And and I think, you know, that’s one of the things that we’ve been building as we’ve gone over the last kind of three or four years. But, yeah, I think we can might have, I think we can might have 2024 with a very, very solid foundation. And, clearly, one of the most important things and, again, ruthless focus from the company is is the Calgary facility. So we collected the feedstock for commissioning.

We constructed it, you know, completed construction in in kind of March, and then we started commissioning. So as you’ll have seen from the video at the beginning of this week, commissioning on the on the front end, on the kind of the on the aggregate separation is actually complete. You know, one of the things that happens with a with with with construction projects and that I’ve seen through my time in, you know, in BP and the like is that construction hands the plant to commissioning to commission it, and commissioning hands it to operations to operate it. And that’s the ultimate kind of destination is when it when it gets to operations. And the front section of this plant that does the, that does the, you know, aggregate separation, and and the production of aggregates to our first product has actually been handed from commissioning to operations.

So as the commissioning guys are focusing on the back half of the plant, you know, the operations guys are now running the front half to to to to to give them the feedstock to, to to process and commission in in the second half. So that’s a phenomenal place for us to get to. We continue, as I said in the video on Monday, we continue to expect the plant to be operating, to be operational by midyear. That that has not changed. We’ve got great confidence in that.

And, you know, the the the first stage, the the the water stage, which obviously, you know, provides aggregate that first product, but also provides the fiberglass covered in in asphalt to go onto the hydrocarbon side, is is working really well. So we’re very, very, we’re very happy with the with the progress of that. You know, the expansion plan, you know, we we’ve looked at 2026. We’ve always had kind of, you know, kind of been chatting about three options. So Hamilton, US 1, and Vancouver.

So kind of in reverse order, as as you saw the press release, we were able to extend the lease agreement in Vancouver, an extension from five years to fifteen years, which obviously can work, you know, the economic life of a a facility. And so that’s, that’s obviously, you know, an an expansion option. Hamilton, we have kicked off the, the permitting process. So the consultation or their pre consultation process has started. We’ve been working with, with HOPA, on the on the lease agreement.

And as you saw already in q one, we had the, we had the LOI with York one for our first tranche of supply. And, again, all those things are are are are important to make sure that we have this pull together to be able to to sanction at the second half of the year. US one, again, we you know, in 2024, we identified the we identified the Frederick site in Maryland to supply for Tamco, and so now it’s all about, it’s all about site selection. And so been going through kind of pretty rigorous site selection all the way kind of from Philadelphia down to down to Baltimore, and and and, you know, Delaware in the middle. And so lots of, yeah, lots lots of work being done on that, and we’re gonna have something to kind of announce here in q two with the with with the site selection.

And, obviously, important because then we, you know, kick that kicks off the permitting process as well. So good progress on on on all those three. I don’t I’m not gonna go through in detail the either the Mid Atlantic or Hamilton. It’s in the it’s in the slide pack, it’s also on on on the deck on the on the on the web. And look, the last thing I would say is, you know, people have heard me talk a number of different times that this isn’t we are absolutely at the tipping point of the stock here.

I I chatted with, you know, when we’re chatting investors down here in in at the MicroCap conference, and my point is being, look, up until this point, this has been a technology story. Like, this has been a technology stock. It’s kind of like, can they take this idea and make it commercial? We’re literally, in my opinion, you know, six to eight weeks away from demonstrating that, you know, middle of the year. And I think this story will pivot rapidly to be not a technology story anymore, but to actually be a deployment story.

And so we’re not gonna be we’re not gonna be measured about measured necessarily against the highly progressing the development of our technology here. We’re going to be measured against how can we deploy this, more quickly. You know, how when you know, what stage do we add licensing that we’ve always talked about in our in our strategic plans. You know, how do we how do we develop the 10 next sites and actually have the resourcing to start working those straight away. And if you think about the 10,000 foot number and you think about, you know, and you think about, you know, 10 sites all delivering all having the potential to deliver something like, you know, 5 to $10,000,000 depending on on what the volume that goes through that, that that gets, that gets us to a completely different conversation with respect to, you know, as Greg says, the the earnings calls will be talking about how we’re deploying plants, what are those plants delivering, what is the EBITDA, you know, difference between kind of plan one, plan three, plan five, etcetera, and it’ll be a completely different conversation.

So when I say that I believe we’re at a tipping point, those are the fundamentals that I can hang on to as we as we chat about, as we chat about how how how how we expect the stock to do. I mean, great. We got awarded the, you know, the Venture 50 for for TSX performance last year, and I’m expecting, hopefully, to do exactly the same again this year. So yeah. I think lot lots of upside, I I I feel.

And I think from the business perspective, I think we’re we’re we’re in great shape. We’ve got an excellent facility that’s literally, you know, commissioning as we speak. And by midyear, we’re we’re expecting to be supplying some product. So, guys, I think, Matt, I think that’s that’s those are my remarks.

Moderator/Question Asker: Thank you, Aiden. We can move on to some q and a now. Our first question is, related to tariffs. So how do you foresee the, Donald Trump tariffs impacting the fundamentals of the business?

Aiden, Company Leader/Executive, NorthStar: Well, look, I I think, you know, I think I got quoted at the end of last year saying that I wanted to be the I wanted this business to be the Tim Hortons of asphalt shingle reprocessing. Actually, down in Vegas, I’ve had to change that to the Dunkin’ Donuts to be fair. But but yeah. The the you know, we we have a local collection market, so it doesn’t matter if you’re collecting in Hamilton in Canadian dollars or you’re collecting in, you know, Philadelphia, Atlanta, and US dollars, the collection is local. The the manufacturing is local.

The jobs are local, and and the production is is is stays in country. So US One, it’s getting collected locally, produced locally, and it’s going to Tamco. You know, Calgary, it’s getting collected locally. It’s getting produced locally, and it’s going to it’s going to McAshville. Now to be fair, it’s in US dollars.

So so we have US dollar exposure because all commodities, as you know, from an asphalt perspective are are in US dollars, whereas collection in Canada would be in Canadian dollars. So there’s definitely a there’s definitely an exchange rate difference. And I think the only thing where there could be any impact whatsoever is if we were buying if we’re constructing in The US and buying equipment in The US and the equipment was coming from Canada or vice versa, You know, there may be a tariff on the equipment, but, you know, of a, you know, of a of a $20,000,000, you know, build, you know, it could be 250 k or 500 k maybe. And all our suppliers have got international options too. So we may be able, for example, to get a piece of equipment, which is which were which in Calgary we bought, from Texas that they may have they have a European division where we may buy it from France.

So, I mean, we we there’s definitely supply options, and and I don’t think the core of the business is affected really at all because we’re because we’re so localized.

Moderator/Question Asker: For the, very rigorous answer there.

Aiden, Company Leader/Executive, NorthStar: Sure.

Moderator/Question Asker: I have a few Calgary questions here, so I’m gonna combine, three or four of them. So what are some of the biggest lessons you’ve learned through the construction and commissioning process for the Calgary site? And, also, like, what kind of how does that carry forward as you deploy the business?

Aiden, Company Leader/Executive, NorthStar: Well, I mean, I’ve always used the technical term to say when you’re constructing the first of its kind or you’re commissioning the first of kind, it’s always gonna be a bit of a shit show at times. And and, you know, you’ll you’ll learn a lot of lessons about, well, what would you do with your plan? What would you do with your process? What would you do with your equipment? How do you put it together?

How do you interface between between the various modules that we’ve built? And all of that provides brilliant learning. We we actually you know, we had a a I don’t The the board came to decide at the April. We took them through the plan, and then we went through the lessons learned, of how we think we can improve it, and it was like two slides. You know?

So so there’s a lot of and and that was and that was just as we were coming into commissioning. And I suspect by the time we get to the end of commissioning, there’ll be another slide, with bullet points on it about lessons that we’ve learned as we’ve gone through. So I I definitely think and I’ve always said that I that I believe the capital for the run rate to to build new facilities will be lower than Calgary, and I I continue to think that. And I think the the the speed of deployment will be quicker. One one really good example of the of that is when we run Calgary, we know the set points to put in the control system for the next facility.

Today, we do not know that. That’s why we’re commissioning. So that’s why commissioning has taken longer in Calgary because it’s the first facility. But once it’s once it’s operating and, you know, you know, the the set point for the level on one of the mixing tanks is x, like, you literally just preprogrammed that into into the Hamilton system, and the control system is literally ready to turn on and go. No.

Yeah. You still have to make sure the interface works. You still have to start at the front. You still have to, you know, work your way through commissioning, but it it will not take the length of time that it that it takes now. So I think the lessons learned will will provide benefit for, you know, for for the for lower capital and faster deployment of both construction and certainly commission.

Moderator/Question Asker: Excellent. Thank you. The next question is sort of more about, the Calgary site from the community perspective. So how’s the reception been locally? You know, any noise complaints from the neighbors or anything of that sort?

Aiden, Company Leader/Executive, NorthStar: No. No. The I mean, the Calgary site, we’ve been we’ve been, you know, working there since the beginning of last year when we when we started when we started collections. So, you know, I think, you know, truck traffic has has been has been pretty steady. I think some of the neighbors in the area were getting fairly excited about the parking on the street because there were there were lots of people involved in constructing this this building as you saw.

You know, we’ve you know, and and and touch wood and, you know, great without without a lost time incident, which was very, very, very good for for for for the for the safety for the site, which was important. But yeah. And and I think, you know, obviously, one of the things is we as we hire workers, as you’ve seen, you know, we’re we’re we’re bringing on the operations team. The key reason that we are able to operate the front end of the plant is because we have, you know, the the operations team in place, not fully resourced quite yet, but but but pretty close. And so I think that that’s been good.

It has been interesting actually that, you know, the people people that have joined from the operations team are also very excited about not just joining not just getting a job with a company that’s kind of, like, building you know, has built a facility in in Calgary, but actually are very excited about the the the development and growth journey that we’re on with this company and that this is the first of its kind, and this is number one in a line of 300 or, you know, however many we end up building. But but yeah. So so so I think that’s been that’s been really, really well received and kind of like and it’s been great to to bring local local work workforce on in in the Calgary region.

Moderator/Question Asker: Our next question is related to so how do you view expansion opportunities, comparing The United States and Canada? Like, how are you evaluating the

Aiden, Company Leader/Executive, NorthStar: different I mean, as we think about expansion opportunities, mean, people who’ve who’ve heard me talk about how we analyze sites, we we kind of we we have a pretty sophisticated matrix that looks at both kind of objective and subjective kind of kind of subjective kind of measures. So so the three big ones are what is the local oil price or so what is the local asphalt price? Because, obviously, there’s regional differences, number one. Number two, what is the tipping fee in the region? Because, obviously, we generally discount to to incentivize, but the starting point of the index is the is is the tipping fee.

And more interestingly, this year, we’ve now started or sorry. At 2024, we’ve actually started to assess and what is the what is the shingles kind of what is what is the shingle size in that location? And what I mean by that is if we can do a 80,000 ton for sorry. If we we spend the capital in the Calgary facility, capital is spent to build a 40,000 ton facility. And a 40,000 ton facility is defined by essentially, you run the facility using a day shift.

If and and the constraint to move to 80,000 tons is not capital. It’s just shingle availability. So clearly, an 80,000 ton facility is, you know, more efficient than twice the EBITDA of a 40,000 ton facility. So we’re now looking at, you know, to start with for and I chatted about it earlier, then the next the portfolio of the next 10 facilities, one of the criteria will be and cannot support 80,000 tons. Now it’s always really important to not go to 80,000 tons necessarily straight away to establish your operations team, to establish your processes, to establish your shipping and your customer offtake, etcetera.

But ultimately, you know, within three to six months of setting that up, hiring the second shift to make a good 80,000 tons is is is the criteria. One of the other criteria, of course, is is, you know, like the speed of permitting, you know, the support from the for from the local government. And often the support from the local government will show up as kind of what is the tipping fee. So so there’s a there’s a kind of like a a bit of a symbiosis between the objective and the subjective, but those are the three key criteria we’re looking at now as we think about that. So if you do think about that, then look.

And if you think if you take our 16,500,000 tons and you divide it down, it’s about, you know, 15 in The US and and and one and a half in Canada. So that’s why we’re at conferences like this one in Vegas to to to start to familiarize not only the market or on investors, but also people in general that that The US is a major target market. And and so and again, because of the localized nature of the business that we build, we believe we’re fairly immune to the to the noise that’s kinda going on between between Canada and The and The US. Yeah. And and we think it’s a we think it’s a very strong plan.

Moderator/Question Asker: Jayden, for our last question here, so what is your long term vision for the company? Say five, ten years.

Aiden, Company Leader/Executive, NorthStar: My long term vision for the company? Well, like, we you know, I I clearly, had to include some sort of a Rory McElroy quote. We, we we haven’t, you know, we haven’t had we haven’t won the grand slam yet. We we’re, like, well, this is this is gonna be our first major by, by by delivering the Calgary facility. Look.

I I and and we’ve said repeatedly that we thought we have the capability to build, you know, three to four plants a year organically. I think the size of this market is so huge with a potential of, you know, like, 440,000 ton facilities that licensing the technology is something that we we think is a natural step. And remember, if you look at the if you look at the ARMA statistics for the, you know, their strategy to build to divert 50% of all shingles away from landfill by 2035, that would need to that would require 240,000 ton North Star plants, which is absolutely massive an absolutely massive market. So I think what we need to do is I think we need to build the organization, and and my vision is to have an organization that can repeatably build, you know, three to four facilities a year under our control and three to four facilities licensed per year. I I think that will give us, you know, huge financial capability, but I also think it will establish a program whereby we would have, you know, cities coming to us to build facilities.

And and and this will be self sustaining not only from a no need to raise any capital perspective, you know, great great cash flow coming in, but also in that development pipeline. And so my vision is less about the numbers and more about the point where we get to where literally the phone’s ringing off the hook for us to come to a municipality and divert 80,000 tons away from their landfills. That that to me is the that’s not that’s not my kinda always moving to the seniors tier moment, but it’s but it’s certainly a, it’s certainly a vision, that I’m very excited about.

Moderator/Question Asker: Excellent. Thank you, Aiden. That’s all for questions.

Aiden, Company Leader/Executive, NorthStar: And so well, listen. Thanks as always. Natalie and Trenton, akin to in helping us set this up, as always, and guiding us through. So thanks for that. Great to have Greg on board.

And his first as he said, his his first his first drive through the numbers. I think these are gonna get very exciting as as we as we go through the year and look forward to look forward to the next one where we’ve got some some operations to to tell you guys about. And, yeah, we’ll continue to we’ll continue to do the commissioning videos, and you’ll see those, coming out regularly. Yeah. And look forward to I look forward to to delivering on this and having this facility operating in this business generating cash by the middle of the year.

So thank you.

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