Greenlane Renewables Inc T.GRN

TD

[retiredcf]

Once again, remaining ultra conservative. GLTA

Greenlane Renewables Inc.

(GRN-T) C$0.51

New Contract Announced

Event

Greenlane has been awarded a $4.6 million contract.

Impact: NEUTRAL

Details: Greenlane has been awarded a $4.6 million (US$3.5 million) contract to supply its pressure swing adsorption biogas upgrading system for a dairy manure RNG project in the western United States. The company noted that order fulfillment will commence immediately, but did not provide any additional details on customer profile, completion date, or timing of revenue recognition.

TD View: Recall that we recently downgraded Greenlane to HOLD with Q3/22 results (full report), noting that the company's trailing 12-month book-to-bill ratio has fallen below 1x on a trailing 12-month basis, making continued revenue growth less likely, in our view. Our current forecast assumes $72.2 million of revenue in 2023 (flat year-over-year) as well as $20.7 million in Q4/22 backlog additions, with today's announcement representing the only disclosed award in the quarter, we note that Greenlane's booking activity is currently tracking below our expectations. However, order flow can often be lumpy in nature so we will not be updating our estimates at this time. As shown in Exhibit 1, contract awards derived from animal manure-based RNG projects have become increasingly rare for Greenlane over the past year as they are typically associated with the California transportation market (LCFS/RIN). In Exhibit 2b of this week's Transition Tracker (full report), we show that implied manure- based RNG pricing has deteriorated significantly given the continued weakness in California LCFS pricing (-54.1% year-to-date). In our view, this will likely result in slower sanctioning of marginally economic manure-based projects. In our view, the reduced cadence of manure-based project awards has contributed to our reduced growth expectations for Greenlane.