Greenlane Renewables Inc T.GRN

TD

[retiredcf]

Greenlane Renewables Inc.

(GRN-T) C$.46

$7.2 Million RNG System Sale Award Announced

Event

Greenlane has been awarded a $7.2 million contract.

Impact: POSITIVE

Details: Greenlane has been awarded a $7.2 million (US$5.4 million) contract to supply an integrated sulfur removal and water wash system for a food waste to pipeline RNG project in Ohio, 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 unlikely, in our view. The $7.2 million award exceeds our Q1/23 bookings estimate of $4.7 million, but is below our Q1/23 System Sales segment revenue assumption, implying that in the absence of additional orders between now and the end of Q1/23, managements book-to-bill ratio will remain below 1x. On a full year basis, we are forecasting $52.5 million in consolidated sales, meaningfully below consensus of $83.6 million (range: $52.5 million to $105.0 million). Our revenue estimate includes $45.2 million from the System Sales segment and note that Q3/22 backlog was $36.7 million, which we expect will decrease to $24.8 million in Q4/22. Our current forecast assumes a ramp up in bookings beginning in Q2/23 (2023E Bookings: $46.9 million), but note that revenue is recognized on a percentage of completion basis and projects typically take nine to twelve months to complete. As a result, we expect that the 2023 consensus revenue estimate is likely to decrease. Greenlane will report Q4/22 results later today, and we will update our estimates to reflect this order at that time