Greenlane Renewables Inc.
(GRN-T) C$0.76
Q1/22 Results
Event
Greenlane reported Q1/22 results.
Impact: NEUTRAL
Q1/22 Results: Greenlane reported Q1/22 revenue of $16.3 million, right in line with our estimate. At the EBITDAS level, Greenlane reported a loss of $0.8 million, below our estimate for a loss of $0.1 million as a result of lower-than-expected gross margin (24.7% vs. our estimate of 25.3%) and higher-than-expected G&A ($4.3 million vs. our estimate of $3.9 million). Quarter-end backlog of $35.7 million was below our estimate of $46.6 million, as we had assumed that its $11.4 million order announced on April 28 would be included in the quarter-ended figure. Details on page 2.
Conference Call Takeaways: Several of the questions revolved around the backlog (down $14.4 million or 29% sequentially). Management stressed that this figure represents a point in time and that new contract awards are inherently lumpy in nature. Based on the company's ongoing bid activity and broader conversations with customers, management believes the industry is well-positioned for growth.
Estimate Changes: Our revised estimates feature relatively minor changes to our 2022 and 2023 revenue projections. However, our EBITDAS estimates decrease modestly, due to a reduction in gross margin expectations as a result of the ongoing negative impact of supply chain challenges as well as a higher G&A run-rate, including a cost-of-living salary increase that was introduced at the beginning of 2022 and ongoing strategic-initiative spending. Details on page 3.
TD Investment Conclusion
Greenlane is an asset-light engineering services firm serving a high-growth, low- carbon market at the early stages of commercialization, with a solid reference base of project deliveries and what we believe is a competitive product portfolio. There has been downward pressure on valuations across several energy transition industries, due in part to supply chain challenges, inflationary pressures, rising interest rates and weakness to a major RNG benchmark price (California LCFS). That said, we continue to believe that the fundamental growth outlook for the sector remains strong. With the quarter, we are maintaining our SPECULATIVE BUY rating and $1.60 target price.