Earnings call transcript: Tidewater Renewables Q4 2024 beats EPS forecasts

Tidewater Renewables Ltd reported a better-than-expected performance for Q4 2024, with earnings per share (EPS) of -$0.09, surpassing analysts’ forecasts of -$0.26. The company’s revenue reached $76.44 million, exceeding expectations of $65.7 million. Following the announcement, Tidewater’s stock surged by 28.63%, closing at $3.10, reflecting positive investor sentiment. According to InvestingPro data, the company’s stock appears undervalued based on their proprietary Fair Value model, with a market capitalization of $61.22 million and an attractive EV/EBITDA ratio of 3.79x.

Key Takeaways

• Tidewater Renewables reported a significant EPS beat, with actual results much better than forecasted.
• Revenue also exceeded expectations, contributing to the positive market reaction.
• The stock price increased substantially, reflecting investor optimism.
• The company is the sole Canadian renewable diesel producer in the BC market.
• Strategic adjustments in credit facilities and market positioning were highlighted.

Company Performance

Tidewater Renewables demonstrated strong performance in Q4 2024, with a significant improvement in EPS compared to forecasts. The company’s focus on the Canadian renewable diesel market, along with strategic financial adjustments, appears to have bolstered its market position. The sale of Rimrock Renewables Partnership interest and diversification of its customer base also contributed to the positive outlook.

Financial Highlights

• Revenue: $76.44 million, exceeding the forecast of $65.7 million.
• Earnings per share: -$0.09, better than the forecasted -$0.26.
• Q4 2024 Adjusted EBITDA: $6 million, a 44% decrease from Q4 2023.
• Full Year 2024 Adjusted EBITDA: $74.5 million, a 62% increase from 2023.

Earnings vs. Forecast

Tidewater Renewables reported an EPS of -$0.09, compared to the forecast of -$0.26, marking a significant positive surprise. The revenue of $76.44 million also surpassed expectations of $65.7 million. This positive deviation from forecasts indicates a strong quarter for the company, contrasting with the previous year’s challenges.

Market Reaction

Tidewater Renewables’ stock surged by 28.63% following the earnings announcement, closing at $3.10. This significant increase reflects investor confidence in the company’s ability to exceed earnings expectations and capitalize on its strategic initiatives. The stock’s movement is notable, especially given its 52-week range of $0.58 to $9.00.

Outlook & Guidance

Looking forward, Tidewater Renewables anticipates improved profitability driven by the BC renewable content mandate and potential success with a trade complaint against U.S. imports. The company has not provided specific EBITDA guidance but expects to benefit from tightening carbon intensity mandates.

Executive Commentary

"We are well positioned to see an improvement in profitability," stated Jeremy Banks, CEO. He emphasized the company’s strategic positioning and resilience, adding, "We believe we’re through the worst of it." Banks also highlighted Tidewater’s competitive edge, saying, "We have a strong position to be a leading renewable diesel provider."

Risks and Challenges

• Potential regulatory changes in the renewable energy sector could impact operations.
• The outcome of the trade complaint against U.S. imports remains uncertain.
• Market volatility and macroeconomic pressures could affect demand and pricing.
• Supply chain disruptions may pose challenges to production and distribution.
• Competition from U.S. imports could pressure margins if tariffs are not implemented.

Q&A

During the earnings call, analysts inquired about the potential impacts of the trade tariff and the company’s strategy to navigate regulatory shifts in the BC market. Tidewater’s management addressed these concerns, emphasizing their proactive measures and strategic focus on market expansion.

Full transcript - Tidewater Renewables Ltd (LCFS) Q4 2024:

Conference Operator: Good afternoon, ladies and gentlemen, and welcome to the Tidewater Renewables twenty twenty four Q4 EMEA Financial Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 03/27/2025. And I would now like to turn the conference over to Mr.

Ian Courtney, Chief Financial Officer. Thank you. Please go ahead.

Ian Courtney, Chief Financial Officer, Tidewater Renewables: Thank you, operator, and welcome everyone to Tidewater Renewables’ fourth quarter twenty twenty four results conference call. On the call with me today is our Chairman and CEO, Jeremy Banks, who will provide an update on operations and transactions during the quarter. I will follow with our financial results and then we will open the line for your questions. Before we get started, I’d like to note that today’s call is being recorded for the benefit of individual shareholders of the media and other interested parties who may want to review the call at a later time. The recorded call will be available for a decision.

This morning, we reported results for the fourth quarter and year ended 12/31/2024. A copy of our news release, financial statements, MD and A and AIF may be accessed on CDOT plus or on Amerenity. Before passing the call over to Jeremy, I’ll remind you that some of the comments made today may be forward looking in nature and are based on Tidewater’s current expectations, judgments and projections. Forward looking statements we express today are subject to risks and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non GAAP measures.

To know more about these forward looking statements, on GAAP measures and risk factors, please see the company’s various financial reports, which are available on our website and on SITA plus I’ll now turn the call over to Jeremy.

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Thank you, Ian, and thanks to everyone for joining our Q4 results conference call today. We are excited to share with you updates on the actions Tidewater Renewables has taken to improve the corporation’s financial position and outlook. To begin, I’ll address our ongoing regulatory engagement efforts. Tidewater Renewables has been actively engaged in discussions with both the government of Canada and the government of British Columbia to explore appropriate adjustments to the low carbon fuel regulations and policy environment that will provide for a fair and level playing field for renewable diesel produced in Canada. We have raised concerns about the competitive disadvantage based by Canadian producers due to the ability of U.

S. Renewable diesel producers to export their products into British Columbia. This unfair advantage arises from U. S. Subsidies at the point of production and the generation of emission credits at the point of sale in Canada, creating an unleveled playing field.

We are encouraged by recent developments in British Columbia. On 02/27/2025, the government of British Columbia announced amendments to the Low Carbon Fuels Act. These changes include increasing the renewable fuel content requirement for diesel from 4% to 8% for the 2025 compliance period and mandating the renewable fuel content be produced in Canada effective 04/01/2025. We view these amendments as a positive first step toward addressing the unfair trade environment and strengthening the Canadian biofuels sector. We believe these changes will help level the playing field, allowing us to compete as the lowest cost delivered renewable diesel producer in the British Columbia market and support Tidewater Renewables and broader Canadian renewable diesel industry.

We will continue to collaborate closely with both the government of Canada and the government of British Columbia to ensure the right policies are in place to support and support growth and fair competition in the Canadian renewable fuels market. Next, I’ll provide an update on our trade action. As part of our efforts to ensure fair competition in the renewable diesel market, Tidewater Renewables filed a trade remedy complaint with Canada Border Services at the end of twenty twenty four. This complaint addresses what we believe to be the unfair subsidization and pricing of U. S.

Renewable diesel imports, which are negatively impacting the competitiveness of our Canadian operations. On 03/06/2025, Canada Border Services formally initiated an investigation into our allegations, confirming the validity of our concerns. We are confident in the likelihood of success in this process. Based on our analysis and legal advice, we expect that starting in June 2025, duties of between $0.5 and $0.8 per liter would be imposed on US imports of renewable diesel to counteract the unfair trade practices. Final duties would be imposed from September 2025 and will be in place for five years, which will provide much needed stability for the Canadian renewable diesel market and our operations.

Moving on to our fourth quarter operational performance, I am pleased to report that our HDRD Complex continued to perform exceptionally well. For Q4 twenty twenty four, we achieved average daily throughput of 2,677 barrels per day. For perspective, when I started in January of twenty twenty four, the facility was struggling to run at approximately two thirds capacity or approximately 2,000 barrels a day. The team has since done an admiral job and working out the commissioning challenges and being able to run the plant at capacity with industry appropriate reliability. On a full year basis, the HDRD complex achieved daily throughput of 2,643 barrels per day, which was above our full year target of 2,550 barrels per day and reflects the low rate of production we saw in Q1.

Since the start of commercial operations in November 2023, Tidewater Renewables has produced and sold over 170,000,000 liters of renewable diesel into the local British Columbia market. This robot’s performance is a testament to the operational efficiency and effectiveness of our team and it reflects our strong commitment to safety and environmental stewardship. Furthermore, during Q4, we were pleased to receive the final grant of LCFS credits from the BC government in recognition of achieving the twelve month operational milestone at the HTRG complex. In another positive development, subsequent to year end on 01/10/2025, we completed the sale of Tidewater Renewables interest in the Rimrock Renewables Partnership for total proceeds of $7,800,000 This was a great outcome as the partnership’s proposed renewable gas project would have cost tens of millions of dollars to complete and positive cash flow and expected returns were below our standards and years away. As we look forward to the rest of the year, our actions are starting to bear fruit.

Demand for domestically produced renewable diesel as well as pricing is showing signs of improvement alongside the associated emissions credits markets. We believe that with the new Canadian renewable content mandate, LCFS regulation changes and a favorable outcome on the trade complaint, we are well positioned to see an improvement in profitability and a return to results more in line what we had observed in the first half of the year at the HDRE facility. Looking forward, the recently enacted renewable content changes, positive outcome on the trade action and the ongoing tightening carbon intensity mandate in BC are expected to create a more balanced and profitable market for renewable diesel. In summary, we are pleased with the progress we’ve made on multiple fronts in the quarter and throughout the year, including regulatory engagement and positive regulation changes, progress on the trade action and strong operational performance. These initiatives collectively position Tidewater Renewables for long term financial success in the Canadian renewable diesel market.

I’ll now turn the call over to Ian, will provide a more detailed review of our financial results for Q4 twenty twenty four.

Ian Courtney, Chief Financial Officer, Tidewater Renewables: Thanks, Jeremy. During the fourth quarter Tidewater Renewables reported adjusted EBITDA of $6,000,000 This represents a decrease of 44% from the fourth quarter of twenty twenty three and a 56% decrease from the third quarter of twenty twenty four. The decrease in adjusted EBITDA was primarily driven by the sale of EBITDA generating assets to Tidewater Midstream during the third quarter of twenty twenty four. This transaction are positive in terms of reducing debt levels and interest costs led to a reduction in our EBITDA generating capacity. For the full year 2024, Tidewater Renewables generated adjusted EBITDA of $74,500,000 a 62% increase from 2023.

The increase was due to the first full year of operations at the HDRD Complex, partially offset by the termination of take or pay contracts in connection with the Taiwan Midstream transaction and realized losses on derivative contracts. Let’s move to year end on 03/26/2025, we took another significant step forward reinforcing our financial concession by pending our credit facilities. Total availability of the first lien credit facility increased by $10,000,000 to $40,000,000 The second lien tranche C facility was also increased by a corresponding $10,000,000 The amendments also provide Tidewater with the option to pick the upcoming April interest payment second lien tranche A facility and have the $5,000,000 balance added to the aggregate principal amount of the facility instead of making a cash payment. The maturity dates of both second lien tranche fee and tranche fee facilities were extended from January 2026 to October 2027. And finally, the financial covenants under both facilities have been waived for an additional two quarters up to 03/31/2026.

Overall, the amendments to the credit facilities, the growing demand for renewable diesel and emissions credits as a result of the BC regulatory changes and the trade point have positively impacted our long term financial viability. As such, the going concern and certainty that was disclosed in the second and third quarter financial statements has been removed from the year end financial statements. I’ll now ask the operator to open the call for questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. And your first question comes from the line of Maurice Choi from RBC Capital Markets. Please go ahead.

Maurice Choi, Analyst, RBC Capital Markets: Thanks and good morning everyone. Maybe just start off with the trade complaint here. The potential duties of $0.5 to $0.8 per liter on U. S. Imports, is there a way to quantify that in terms of your EBITDA or put differently, suppose these things do come through, would you be in a position to provide the Street with EBITDA guidance for 2025 later this year?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes. So thanks Maurice for the question. So that $0.5 to $0.8 per liter tariff, really you need to translate that into the equivalent value of LCFS and CFR credits. Basically, over the years, the BC market has priced itself in terms of import parity related to U. S.

Markets, particularly the California market where they stack on the California LCFS and the RIN D4 value. It is very material. If you look at what level people were able to import renewable diesel into The U. S. At last summer, call it $1.6 a $1.7 a liter, it is that would generate credit prices that were quite low, LCFS equivalent of $200 at $100 CFR.

That is a significant all of that would go to those prices. And basically our view is where current California LCFS and D4 RINs are. And then if we get the $0.5 to $0.8 per liter tariff through the trade case, we will back be back to levels that are very close to what we were in the first half of the year with a stacked, LCFS and CFR credit prices in that $600 kind of level.

Maurice Choi, Analyst, RBC Capital Markets: Let me just quick follow-up about the $0.5 to $0.8 like I know that there’s obviously a list of scenarios that could have emerged out of this. Where does the $0.5

Ian Courtney, Chief Financial Officer, Tidewater Renewables: to $0.8

Maurice Choi, Analyst, RBC Capital Markets: land in terms of the potential scenarios that you envision in terms of duties?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes, I mean the $0.5 is pretty straightforward. That is a calculation based on the subsidy that The U. S. Producers get and the obviously, the unfair trade action that that represents. The 0.8 is more related to the economic analysis that was part of our submission around actual dumping of products.

So it’s right in line with what we think where it should be. And our view is it very much levels the playing field if we’re successful there and will allow for us to generate the types of cash flow that we expect from the facility go forward.

Maurice Choi, Analyst, RBC Capital Markets: And suppose this does come in June as you mentioned, whether that be $0.5 to $0.8 are you possibly going to provide us

Ian Courtney, Chief Financial Officer, Tidewater Renewables: the

Maurice Choi, Analyst, RBC Capital Markets: guidance or unlikely based on all that certainty?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes, right now we’re watching it and we typically don’t put guidance out till after our Q1 release. So we’ll be making that decision as we go operationally. We expect to run that high utilization rates. Obviously, we’re subject to diesel and credit prices. And I do think we have given the market enough information that you should be able to back into those.

Maurice Choi, Analyst, RBC Capital Markets: Got it. And just to finish off with a question about going concern, I think at the last Q3 results, you raised the potential that the company’s ability to continue as a going concern may be in jeopardy. If a number of things were unsuccessful or regulatory changes don’t emerge, How do you see that risk today?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Well, obviously, we think it is no longer there. We feel very good about the BC action and we’re already starting to see some good activity around diesel sales, renewable diesel sales and the value of the associated emissions credits. We obviously feel very good about the increase in liquidity and the support of our lender. And we are cautiously optimistic, but based on our legal advice, we expect to be successful in the trade complaint. And we think with all of that, we have a strong position to be a leading renewable diesel provider and generate significant profitability in the long term.

Maurice Choi, Analyst, RBC Capital Markets: Perfect. Thank you very much.

Conference Operator: Thank you. Your next question comes from the line of Robert Catellier from CIBC Capital Markets. Please go ahead.

Robert Catellier, Analyst, CIBC Capital Markets: Hey, good afternoon, everyone. I just wanted to dig down a little bit on the some of the changes in the market. Specifically, your disclosures and comments refer to the changes in the Low Carbon Fuels Act. That’s a good first step in leveling the fair trade environment. What more do you need to see to ensure your financial stability and then avoid compelling you to seek alternative strategies to address liquidity?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes, I don’t think there’s anything we need to do more to address that front. Obviously, that change has put a significant underpinning of demand for Canadian produced renewable diesel, which we are the only one in the market today. The liquidity support we received from our lender gives us a long runway on that front. And we just think that the trade complaint and being successful there are additive. And, you know, there’s a few other things.

Obviously, we have the terrible forward purchase that was put on by former management that we’re generating losses on our, on that derivative in relation to our feedstock purchases that is dropping off at the end of the year and has been a significant drag on the company. And so you put all of that together, we think we believe we’re through the worst of it. We are appreciative of the BC government for supporting us as well. The federal government has, you know, continued to talk about support for renewable diesel. And so we think we’re out of it to get you there, Rob.

Obviously, we would like the BC government to continue to monitor their LCFS regulations, ensure that the market stays in balance from a credit point

Ian Courtney, Chief Financial Officer, Tidewater Renewables: of view.

Robert Catellier, Analyst, CIBC Capital Markets: Okay. And so what changes in market behavior have you observed since the Canada Border Service Agency initiated its investigation? And similar to that, what progress have you made or what visibility do you have on executing additional forward credit sales at the levels that you need to ensure your ongoing liquidity?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes. So a few things on that front. Obviously, when you look at the total 4,000,000,000 liter a year BC diesel market in 2024, about a third of that market was renewable diesel and the vast majority of that came in from The U. S. And that’s about the level that’s needed to keep the market in balance for LCFS credit generation or the other conventional barrels that are needed to for them to stay in compliance.

So with the buy Canadian mandate that BC has implemented, we have seen significant outreach because we are one of the only ways to satisfy that right now. We also, traditionally last year, we were selling, when I got here diesel, renewable diesel, just a straight up diesel in the diesel pool and selling credits separately. We will continue to do some of that. But we have also with the Canadian content mandate, we are there’s significant interest in buying what we call fully loaded barrels where the compliance obligations go with the barrels and that’s how we are moving our marketing program. So, we are selling a barrel of diesel that includes the LCFS and the CFR credit that is related to that renewable barrel for people to be able to meet their compliance obligations.

So that has had a significant uptick. And then we have just, we had one pretty solid customer last year. We have been diversifying that and adding a significant number of customers who are now, aware that we have renewable diesel available and we can sell them a barrel that’s Canadian meets the Canadian renewable content mandate, as well as provide them with the LCFS and CFR credits they need.

Robert Catellier, Analyst, CIBC Capital Markets: Okay. Last one for me. Obviously, it’s never a bad thing to increase your available liquidity under your credit facility, but what’s the impetus for that change?

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Yes, Hamish, like you say, you can never have too much liquidity. As we have gone through the first quarter, we just wanted to make sure we had an appropriate amount of liquidity in the balance sheet to roll through it. Obviously, we started, we communicated, we were engaged with the government’s last year and call it July. We undertook the transaction in September with Tidewater Midstream to ensure our ability to reduce our debt and sell our compliance credits through the period. There’s been a lot of political uncertainty, which I think has made it, you know, harder for the governments to react.

So BC was in an election and it took them a while. The federal government had been very supportive and obviously, with the pro rolling of parliament, their ability to do things changed as well. And so, you know, with the announcement from BC that the regulation change on Canadian content would start April 1, That was a little bit later than we had hoped and envisioned. And with the trade case, there was a bit of a few weeks delay versus where we wanted it to be. So just better to be safe and have enough liquidity.

It’s still with all of the tariff stuff that’s going on, we have feedstock pricing that hopefully it’s for us positive with some of the trade implications given our position in buying Canadian canola. But between that diesel price volatility and credit markets, it was just the right thing to do and make sure that we aren’t too close to the line.

Robert Catellier, Analyst, CIBC Capital Markets: Okay. Thank you.

Conference Operator: Thank There are no further questions at this time. I will now hand the call back to Mr. Jeremy Banes for any closing remarks.

Jeremy Banks, Chairman and CEO, Tidewater Renewables: Thanks, operator. And thanks everyone for joining us on the call today. Please don’t hesitate to reach out to me or the team if you

Maurice Choi, Analyst, RBC Capital Markets: have any questions. Thank you.

Conference Operator: Thank you. And this concludes today’s call. Thank you for participating. You may all disconnect.

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