Xebec Adsorption Inc. (TSX: XBC) ("Xebec"), a
global provider of clean energy solutions, announced today its
2021 second quarter results, with the following highlights:
-
Record revenues of $32.7 million for the
three-month period ended June 30, 2021, compared to $19.6 million
for the same period the prior year.
-
Adjusted EBITDA of ($4.6) million for the
three-month period ended June 30, 2021, compared to ($0.1) million
for the same period last year.
-
Net loss of $7.5 million or ($0.05) per share in
the three-month period ended June 30, 2021, compared to a net loss
of $0.8 million or ($0.01) per share compared for the same period
in the prior year.
-
Working capital of $97.4 million on June 30, 2021,
for a current ratio of 2.9:1, compared to working capital of $171.1
million and a current ratio of 4.1:1 on December 31, 2020.
-
Management guidance updated with revenues
maintained in the range of $110.0 to $130.0 million and adjusted
EBITDA margins lowered in the range of -3.0% to -4.0% from 3.0% to
4.0%. Adjusted EBITDA margin is affected by new investments in
supporting higher than originally forecasted future revenues and
lower gross margins from RNG projects.
-
As at June 30, 2021, the company had $79.9 million of cash and
restricted cash compared to $168.6 million as at December 31,
2020.
Financial Highlights:
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
% of Change |
Six months ended June 30, |
% of Change |
|
|
2021 |
2020 |
|
2021 |
2020 |
|
(In millions of dollars) |
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
|
Revenues |
32.7 |
19.6 |
67% |
53.3 |
31.8 |
67% |
Gross profit |
5.0 |
4.3 |
16% |
9.2 |
7.3 |
26% |
Gross profit % |
15% |
22% |
|
17% |
23% |
|
Adjusted EBITDA (1) |
(4.6) |
(0.1) |
|
(9.3) |
0.3 |
|
Net income (loss) |
(7.5) |
(0.8) |
|
(16.7) |
(1.5) |
|
Net income (loss) per share - basic ($/share) |
(0.05) |
(0.01) |
|
(0.11) |
(0.02) |
|
Weighted average number of shares |
153,138,535 |
88,884,226 |
|
152,836,023 |
87,086,137 |
|
As at: |
|
|
|
June 30, 2021 |
Dec. 31 2020 |
|
Total assets |
|
|
|
420.2 |
444.7 |
|
Total liabilities |
|
|
|
100.8 |
100.7 |
|
Equity |
|
|
|
319.4 |
344.0 |
|
As at: |
|
|
|
August 11, 2021 |
August 10, 2020 |
|
Backlog (2) |
|
|
|
75.9 |
85.5 |
|
(1) |
Adjusted EBITDA starts with EBITDA and adjusts for Stock-based
compensation expenses, impairment of inventories, exchange
gain/loss on the obligation arising from non-controlling interest
participation in a subsidiary, foreign exchange loss (gain) and
accretion of debt. |
(2) |
August 11, 2021 backlog amount does not include the 18-unit
Biostream agreement because the execution (task) orders have not
yet been processed. In addition, as Xebec transitions more towards
being a services provider, the backlog will not adequately reflect
the future and full revenue profile of the company. |
Financial Results
- Revenues increased
by $21.5 million to $53.3 million for the six-month period ended
June 30, 2021, compared to $31.8 million for the same period the
prior year. The 68% increase is mainly explained by acquisitions in
2020 and 2021, including (1) $15.3 million for services companies
and ACS, and (2) $21.5 million for HyGear and Inmatec. This was
offset by lower revenues from long-term production-type RNG
projects.
- Gross margin
increased from $7.3 million to $9.2 million for the six-month
period ended June 30, 2021 compared to the same period the prior
year. The gross margin percentage decrease from 23% to 17% is due
to working through the company’s lower margin RNG projects.
- Selling and administrative
expenses (“SG&A”) for the six-month period ended June
30, 2021, of $23.2 million were higher by $14.6 million compared to
$8.6 million for the same six months of 2020. The increase is
primarily due to additional SG&A expenses associated with the
newly acquired companies: (1) $3.7 million for services companies
and ACS, and (2) $6.1 million for HyGear and Inmatec. In addition,
$2.3 million was attributed to transaction, due diligence and
integration expenses related to newly acquired and potential future
acquisitions. Finally, SG&A expenses increased due to an
organizational scale up of employees, hiring fees and associated
costs to support the increased level of future sales.
- Research and development
expenses of $1.4 million for the six-month period ended
June 30, 2021 were related to the development of the company’s
second generation of the Biostream product, and the continued
development of biogas upgrading and hydrogen products. As of
January 1, 2021, R&D expenses are expensed as they are
incurred.
- Operating loss of
$15.9 million for the six-month period ended June 30, 2021 compared
to an operating loss of $0.7 million for the same period in 2020.
The increase of the operating loss is mainly explained by the
above-noted increase in SG&A and lower consolidated gross
margin percentage.
- Net loss of $16.7
million or ($0.11) per share in the six-month period ended June 30,
2021 compared to a net loss of $1.5 million or ($0.02) per share
for the same period the prior year.
- Adjusted EBITDA
decreased to ($9.3) million for the six-month period ended June 30,
2021, from $0.7 million for the same period last year.
- Backlog decreased
by $9.6 million over the last 12 months, from $85.5 million on
August 10, 2020 to $75.9 million on August 11, 2021.
CEO Quote:
“In Q2 we delivered record quarterly revenues as
we continued to build the organisational foundations which will
support us to manage and operate a significantly larger and more
diversified cleantech company. While we still saw a meaningful
impact from our legacy production type RNG contracts, I am happy to
report that this impact will be reduced going forward. The rest of
our verticals in hydrogen, oxygen, nitrogen, and the Cleantech
Service Network, are EBITDA profitable and continue to perform very
well from a revenue growth and margin perspective.
A significant commercial milestone this quarter
was the Biostream contract signed with one of the leading U.S.
dairy RNG developers. Our continued improvements in the Biostream
product will allow us to target a large addressable market with a
one-of-its-kind offering. This standardized product will have
better scalability and margins than our previous customized systems
and will become a major contributor to our future organic RNG
segment growth. Given the positive market reception of our
Biostream product, we have started the production of 30 units in
our Canadian facility, which represents a significant expansion of
our existing manufacturing capacity.
2021 has been challenging so far, but we
anticipate improved performance for the rest of the year
accompanied by strong year-over-year revenue growth as we prepare
for continued growth into 2022 and beyond. Over the next few
quarters, we also expect a progressive return to normal EBITDA
performance. I am proud of the foundation the team is building as
we tackle the long-standing need for renewable and decentralized
on-site gas generation solutions around the world,” stated Kurt
Sorschak, Chairman, President and CEO of Xebec Adsorption Inc.
Current Market Outlook
Xebec continues to see increasingly favourable
political and regulatory backdrop for its products and services, as
evidenced by the recent master service agreement for 18 BGX
Biostream with a leading US dairy RNG developer, as referred to
above. North America, particularly the U.S., continues to be seen
as a high-growth geography for the company as the country aims to
increase its renewable gas production to support decarbonization
goals, circular economies, and the rural sector. Similar trends are
expected in other parts of the world, such as Europe, South and
Southeast Asia, the Middle East, and China, contributing to the
growth in demand for our products.
While consolidated gross margins continue to be
impacted by the previously announced loss making long-term,
production-type RNG contracts, the company expects that this impact
will be tapered down in subsequent quarters. Xebec has implemented
learnings from these contracts and expects that with its new
standard Biostream product, its improved quoting processes and
adjusted installation and integration processes, margins will start
to revert to normal levels with new contracts.
Continued strong demand for our products has led
Xebec to commence investments in its renewable natural gas,
hydrogen, oxygen, and nitrogen generation segments. These
investments include continued improvements and expansion in
Biostream sales and production capacity, significantly increasing
Inmatec’s production floorspace and expanding sales and production
staffing which will allow for future revenue growth. Xebec believes
that these are necessary investments to achieve a larger market
presence, taking advantage of growing market opportunities.
Systems - Cleantech
Renewable Natural Gas
(RNG)Xebec achieved a significant commercial win that
serves to accelerate its shift towards standardized biogas
upgrading products for the agriculture RNG market, as underlined by
the agreement with a leading dairy RNG developed for 18 Biostream
units referred to earlier. The supply agreement provides important
validation of the new product that was launched last year. To date,
several first-generation Biostream units have been delivered to
customers in California and Idaho and preparation for assembly of
second-generation units is starting in Q3 2021 and deliveries
expected in early 2022.
On July 22, 2021, U.S. Senators Sherrod Brown
(D-OH) and John Thune (R-SD) reintroduced bipartisan legislation to
encourage investment in biodigester and nutrient recovery systems.
Their bill, known as the Agriculture Environmental Stewardship Act,
provides a 30 percent investment tax credit to help offset the
upfront costs associated with building biodigester systems. If
passed, this legislation, alongside other initiatives, are expected
to result in a rapid build out of U.S. RNG projects.
According to the American Biogas Council, it is
estimated that 8,574 dairy, poultry, and swine farms are primed for
biogas and renewable natural gas production. Based on data from the
U.S. EPA’s Livestock Anaerobic Digester Database, Biostream is
estimated to cover more than 80% of these animal manure use cases
with multiple standardized configurations which range in capacity
between 55 to 840 SCFM (90 to 1350 NCMH).
Due to anticipated market demand, Xebec is
initially targeting production of 30 Biostream units for delivery
over the next year in its Canadian manufacturing facility. The
manufacturing facility is also being modified and is expected to
allow for the annual production of approximately 30 to 40 Biostream
units. Furthermore, Xebec is exploring new capacity in the U.S. as
more purchase orders are signed.
Overall, Xebec expects that Biostream will lead
to a stronger organic revenue growth profile for the segment, more
predictable cost management and improved gross margins. With larger
quantities of standardized components and parts, Xebec has started
to see significant improvements in economies of scale as it
prepares for assembly of the second-generation Biostream. This is
an improvement over the less predictable and lower gross margins
seen in its long-term, production-type RNG contracts, which have
experienced cost overruns.
HydrogenXebec’s hydrogen
activity through HyGear continues to be robust. The key
developments in Q2 2021 including signing its second hydrogen
refueling station supply contract in the Netherlands, signing a
10-year gas-as-a-Service agreement with one of the largest glass
manufacturers in the world, and commissioning a Gas-as-a-Service
hydrogen generation unit for Turkey’s first lubricant recycling
plant. In Q3 2021, we expect to see several projects commissioned
including a 300kg H2/day installation in the Czech Republic to a
globally active German lighting company for tungsten
manufacturing.
In addition, HyGear is making the successful
transition from one-time equipment sales to deploying
Gas-as-a-Service assets. As a result of the transition to this
business model, the company will see more recurring and profitable
revenue streams as it shifts towards selling hydrogen molecules
instead of equipment.
Xebec continues to see increased interest for
its hydrogen PSA purification platform worldwide as more hydrogen
generation systems and refueling stations come online. For example,
a $1.2 million hydrogen PSA order was received in Q2 2021 from a
customer in Poland for a hydrogen refueling station producing
approximately 160kg/hr of hydrogen. The company is in advanced
discussions with several parties and expects to receive
larger-scale hydrogen purification contracts in the next few
months.
Oxygen and NitrogenInmatec
continues to see record production levels primarily due to the
heightened demand caused by the COVID-19 pandemic for sustainably
and reliably sourced medical-grade oxygen. In Q2 2021, a lease was
signed to double Inmatec’s production space to support further
growth in medical oxygen and nitrogen generators. After receiving
several large follow-on contracts from India and many other
countries, order activity continues to be driven by countries
hardest hit by COVID-19 or those in preparation for subsequent
waves.
On-site oxygen and nitrogen generation
significantly reduces the burden on the environment and costs for
customers. Generating gases on-premises results in more
environmentally friendly gas generation through reduced CO2
emissions by avoiding the transportation of gases, leading to a
reduction of particulate matter, delivery bottlenecks and
congestion on the road network. In addition, Inmatec’s on-site
oxygen generators are used in biogas and renewable natural gas
plants as a component within the desulphurization process.
Inmatec’s on-site oxygen and nitrogen generation
revenues are now being included under the “Systems – Cleantech”
segment due to the nature of its products.
Support – Industrial Products &
ServicesXebec continues to make solid progress in its
roll-up strategy by acquiring compressed air service companies to
build out the company’s Cleantech Service Network. In Q2 2021 a new
U.S. global headquarters for the industrial group was established
in Mooresville, NC, a top region for compressed air and gas
expertise. The successful integration of these acquisitions remains
a key focus for Xebec and growth is being supported by the
company’s newly implemented ERP and CRM systems.
Xebec closed two important and complementary
acquisitions of Tennessee-based Nortek Belair Corporation
(“Nortec”) and United Kingdom-based Tiger Filtration in Q2
2021.
Nortec became the company’s first U.S.
manufacturing facility and will become a dedicated “Center of
Excellence” for engineering of dehydration-based products such as
compressed air, CNG/RNG and hydrogen dryers. In addition, Xebec is
transitioning all its dryer business from Canada to Nortec to allow
for higher production rates of the second generation Biostream
products in its Quebec facility. Tiger Filtration further bolsters
Xebec’s strategy to become more service and support driven by
allowing the company to vertically expand aftermarket consumables
manufacturing. Tiger Filtration is expected to allow Xebec to
capture immediate sales and costs synergies and create new
consumable products for the energy transition.
Xebec expects additional acquisitions this year,
and is targeting a yearly revenue run rate in the segment of
approximately $250 million by 2025.
Renewable Gas
InfrastructureXebec is addressing the renewable gas
infrastructure opportunity through GNR Quebec Capital L.P.
(“GNRQC”), a fund created in partnership with The Fonds de
solidarité FTQ (“Fonds”), the largest capital development fund in
Québec. Xebec is an equal equity investor alongside the Fonds and
will participate in the sale of renewable natural gas equipment
alongside long-term parts & service agreements for the
equipment.
The fund has evaluated 24 projects to date and
is actively engaged with 20 of both greenfield and brownfield
varieties in agriculture, municipal, landfill and industrial waste
applications. Several projects are in advanced stages and once the
detailed engineering phase is completed, GRNQC expects to announce
these investments.
Management Guidance for 2021For
fiscal full-year 2021, Xebec is updating its guidance with revenues
maintained in the range of $110.0 to $130.0 million and adjusted
EBITDA margins lowered in the range of -3.0% to -4.0% from 3.0% to
4.0%. The adjusted EBITDA margin is a result of the loss making RNG
contracts in combination with higher SG&A investments required
to build the necessary organizational foundations for future
growth.
Xebec to Host Live Investor Webinar to
Discuss Q2 2021 ResultsAn investor webinar for
shareholders, analysts, investors, media representatives, and other
stakeholders will be held today, August 12, 2021, at 8:30AM EDT
(5:30AM PDT).
Register here:
https://app.livestorm.co/xebec-adsorption-inc/2021-q2-investor-webinar
A recording of the webinar and supporting
materials will be made available later today in the investor’s
section of the Company’s website
at xebecinc.com/investors.
2021 Second Quarter Financial Statements
and Management’s Discussion and AnalysisThe complete
financial statements, notes to financial statements, and
Management’s Discussion and Analysis for the three-month period
ended June 30, 2021, are available on the company’s website at
xebecinc.com/investors or on the SEDAR website at
www.sedar.com.
Related
links:https://xebecinc.com/
About Xebec Adsorption Inc.
Xebec is a global provider of clean energy solutions for renewable
and low carbon gases used in energy, mobility and industry
applications. The company specializes in deploying a portfolio of
proprietary technologies for the distributed production of
hydrogen, renewable natural gas, oxygen and nitrogen. By focusing
on environmentally responsible gas generation, Xebec has helped
thousands of customers around the world reduce their carbon
footprints and operating costs. Headquartered in Québec, Canada,
Xebec has a worldwide presence with seven manufacturing facilities,
eight Cleantech Service Centers and five sales offices spanning
over four continents. Xebec trades on the Toronto Stock Exchange
under the symbol (TSX: XBC). For more
information, xebecinc.com.
Cautionary Statement This press
release contains forward-looking statements within the meaning of
applicable Canadian securities law. These statements relate to
future events or future performance and reflect the expectation of
Management regarding the growth, results of operations, performance
and business prospects and opportunities of the Corporation or its
industry. Forward-looking statements typically contain words such
as “believes”, “expects”, “anticipates”, “continues”, “could”,
“indicates”, “plans”, “will”, “intends”, “may”, “projects”,
“schedules”, “would” or similar expressions suggesting future
outcomes or events, although not all forward-looking statements
contain these identifying words. Examples of such statements
include, but are not limited to, statements concerning: (i) actions
expected to be undertaken to achieve the Company’s strategic goals;
(ii) the key market drivers impacting the Company’s success; (iii)
intentions with respect to future renewable gas work; (iv)
expectations regarding business activities and orders that may be
received in fiscal 2021 and beyond; (v) trends in, and the
development of, the Company’s target markets; (vi) the Company’s
market opportunities; (vii) the benefits of the Company’s products,
(viii) the intention to enter into agreements with partners; (ix)
future outsourcing; (x) expectations regarding competitors; (xi)
the expected impact of the described risks and uncertainties; (xii)
intentions with respect to the payment of dividends; (xiii) the
management of the Company’s liquidity risks in light of the
prevailing economic conditions; (xiv) the Company’s cost reduction
plan; (xv) the search for additional financing over the next
months; (xvi) statements regarding the merits of the class action
complaints filed against the Company; and (xvii) 2021 revenue and
EBITDA guidance.
These statements are neither promises nor
guarantees but involve known and unknown risks and uncertainties
that may cause the Company’s actual results, level of activity or
performance to be materially different from any future results,
levels of activity or performance expressed in or implied by these
forward-looking statements. These risks include, generally, risks
related to revenue growth, operating results, industry and
products, technology, competition, the economy, the sufficiency of
insurance and other factors which are discussed in greater details
in this press release and in the Annual Information Form of the
Corporation filed on SEDAR at www.sedar.com.
Forward-looking statements contained herein are
based on a number of assumptions believed by the Corporation to be
reasonable as at the date of this press release, including, without
limitations, assumptions about trends in certain market segments,
the economic climate generally, the pace and outcome of
technological development, the identity and expected actions of
competitors and customers, assumptions relating to the merits of
the class action complaints filed against the Company and their
impact, the value of the Canadian dollar and of foreign currency
fluctuations, interest rates, working capital requirements, the
anticipated margins under new contracts awards, the state of the
Corporation’s current backlog, the regulatory environment, the
sufficiency of internal and disclosure controls, the ability of the
Corporation to successfully integrated acquired business, and the
acquisition and integration of businesses in the future. Other
assumptions, if any, are set out throughout this press release. If
these assumptions prove to be inaccurate, the Corporation’s actual
results may differ materially from those expressed or implied in
the forward-looking statements. The forward-looking statements
contained herein are made as of the date of this press release and
are expressly qualified in their entirety by this cautionary
statement. Except to the extent required by law, the Company
undertakes no obligation to publicly update or revise any
forward-looking statements contained herein. Readers should not
place undue reliance on forward looking statements.
Non-IFRS
MeasuresThis press release refers to financial
measures that are not recognized under International Financial
Reporting Standard (“IFRS”). A non-IFRS financial measure is a
numerical indicator of a company's performance, financial position
or cash flow that excludes or includes amounts or is subject to
adjustments that have the effect of excluding or including amounts
that are included or excluded in most directly comparable measures
calculated and presented in accordance with IFRS. Non-IFRS measures
do not have any standardized meaning under IFRS and therefore are
unlikely to be comparable to similar measures presented by other
companies having the same or similar businesses.
The Corporation believes these measures are
useful supplemental information. The following non-IFRS measures
are used by the Corporation in this press release: EBITDA, EBITDA
margin, Adjusted EBITDA, Adjusted EBITDA margin, backlog of
Xebec.
Please find below definitions of non-IFRS
financial measures used by herein:
“EBITDA” means the earnings before interest,
income taxes, depreciation and amortization, where interest is
defined as net finance costs as per the consolidated statement of
comprehensive income.
“EBITDA margin” being EBITDA as a percentage of
revenues.
“Adjusted EBITDA” means starting with EBITDA and
adjust for Stock-based compensation expenses, impairment of
inventories, exchange gain/loss on the obligation arising from
non-controlling interest participation in a subsidiary, foreign
exchange loss (gain) and accretion of debt.
“Adjusted EBITDA margin” being Adjusted EBITDA
as a percentage of revenues.
“Backlog” means contracts that have been
received and considered as firm orders.
For more information:
Xebec Adsorption Inc.
Brandon Chow, Director, Investor Relations
+1 450.979.8700 ext 5762
bchow@xebecinc.com
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