Greenlane Renewables Inc.
(GRN-T) C$1.16
Q4/21 Results
Event
Greenlane reported Q4/21 results.
Impact: NEGATIVE
Q4/21 Results: Greenlane reported Q4/21 revenue of $17.1 million, above our estimate of $14.0 million. At the EBITDAS level, Greenlane reported a loss of $0.6 million, below our estimate of $0.2 million as higher revenues were offset by lower- than-expected gross margins (24.8% vs. our estimate of 26.9%), and $0.5 million in spending related to "strategic initiatives" (this was added back to the reported Adjusted EBITDA figure). Quarter-end backlog of $50.1 million was slightly below our estimate of $53.1 million due to higher-than-expected revenues in the quarter, with quarterly bookings previously released. Details on page 2.
Conference Call Takeaways
Q4/21 Revenue Strength: The company experienced expedited revenue recognition in the quarter as a portion of sales were fulfilled from equipment held in inventory (typically recognized on a percentage of completion basis). As a result, we view the strong revenue in the quarter as a positive outlier.
Transportation Delays Weighing on Margins: Management is seeing inflationary cost pressure, but contracts are largely structured to pass this on to its customers. That said, the company has been negatively affected by supply-chain and transportation- related delays. The company is no longer providing gross margin guidance, but we expect margins to remain at the lower end of its previously disclosed 25-30% range on a go-forward basis.
Estimate Changes: Despite the strong revenue beat in the quarter, we are not making any material changes to our revenue estimates and we have reduced our margin expectations for continued inflationary pressure and ongoing spending related to the pursuit of strategic initiatives. See page 3 for more details.
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. With no major changes in our estimates, we are maintaining our SPECULATIVE BUY rating, with a reduced target price of $2.00 ($2.25 previously)