Xebec Adsorption Inc. (TSXV: XBC) ("Xebec"), a
global provider of renewable gas solutions, is pleased to announce
its 2020 first quarter results today, with the following
highlights:
- Revenues of $12.2 million in the first quarter
of 2020 compared to $9.8 million for the same period in 2019, a 24%
increase.
- Positive EBITDA at $0.8 million for 2020
compared to $1.1 million for the same first quarter in 2019.
- Net loss of $0.7 million or $(0.01)/share for
2020, compared to a net profit of $0.4 million or $0.01/share for
the same period in 2019.
- Working capital increased at $39.7 million as
of March 31, 2020, for a current ratio of 2.9:1 compared with
working capital of $36.9 million and a 3.2:1 ratio on December 31,
2019.
|
|
|
% of Change |
|
Q1 2020 |
Q1 2019 |
|
(In millions of dollars) |
(unaudited) |
(unaudited) |
|
Revenues |
12.2 |
9.8 |
24% |
Gross profit |
3.0 |
3.3 |
(9) % |
Gross profit as a percentage
of revenues |
25% |
34% |
|
EBITDA
(1) |
0.8 |
0.8 |
|
Adjusted EBITDA
(2) |
0.4 |
1.0 |
|
Net income (loss) |
(0.7) |
0.4 |
|
Net income (loss) per share -
basic ($/share) |
(0.01) |
0.01 |
|
Weighted average number of shares |
85,288,048 |
57,174,783 |
|
As at: |
March 31, 2020 |
Dec. 31, 2019 |
|
Total assets |
72.0 |
64.5 |
|
Total liabilities |
30.3 |
25.5 |
|
Equity |
41.7 |
39.0 |
|
As at: |
May 20, 2020 |
May 27, 2019 |
|
Backlog |
89.8 |
71.9 |
|
(1) EBITDA is a non-IFRS financial measure and the Company
defines it as earnings from operations excluding financial charges,
taxes, foreign exchange loss (gain) and amortization.(2) 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.
Financial Results
- Revenues of $12.2 million for
the first quarter of 2020 compared to $9.8 million for the same
period in 2019, a 24% increase. The increase is mainly explained by
the higher volume of major cleantech contracts and revenue from the
acquisition in California completed in December 2019.
- Gross profit of $3.0 million or 25% of
revenues for the first quarter of 2020 compared to $3.3 million for
the same quarter in 2019, a 9% decrease compared to the same period
in 2019. The decrease is mainly explained by a different product
mix, an increase in amortization expenses of $0.9 million, the
disruption in the manufacturing operations in China, Italy and
California caused by the COVID-19 pandemic and the resulting
reduced productivity.
- Net loss of $0.7 million or
$(0.01) per share for the three-month period ending March 31, 2020,
compared to a net profit of $0.4 million or $0.01 per share for the
same period in 2019, a deterioration of $1.1 million. The decrease
is mainly explained by the negative impact of the COVID-19 on the
Q1 2020 revenues and associated gross margin combined with higher
administrative and amortization expenses.
- Positive EBITDA of $0.8
million for the three-month period ending March 31st, 2020,
compared to $1.1 million for the same period in 2019, a decrease of
$0.3 million.
- Backlog increased by $17.9 million, from $71.9
million on May 27th, 2019, to $89.8 million on May 20th, 2020.
- Selling and administrative
expenses increased by $1.4 million in the first quarter of
2020 compared to the same quarter of 2019. This is primarily due to
the organizational scale-up to meet 2020 objectives for the
Cleantech, Industrial and Renewable Gas Infrastructure segments, in
addition to increased amortization expense of intangible assets
within SG&A.
- Cash on hand as of March
31st, 2020, of $23.7 million and positive working capital at $39.7
million, compared to $36.9 million as of December 31st, 2019, an
increase of $2.8 million.
CEO Quote:“Despite the global
pandemic in the first quarter of 2020, Xebec was able to show
resilience and continue its growth trajectory for the year. Our
first quarter came in weaker than originally expected due to the
impact of COVID-19 on our operations globally. Some industrial
order deliveries were delayed and could not be shipped by March
31st, resulting in lower than expected revenues. These deliveries
have since resumed and a substantial part of these revenues will be
realized in the current quarter. Xebec’s geographical diversity and
the essential nature of our businesses have allowed us to continue
operating and manufacturing with moderate impact on the first
quarter. Our strong balance sheet and backlog provides us a solid
foundation for the coming quarters.
We are happy to report that industry activity
remains robust as customers remain forward-looking. Renewable gas
projects typically span multi-years from inception to commissioning
and deliberate planning is needed by all stakeholders. With
mandates and targets already in place, the pandemic is not
deterring developers from moving projects forward. In addition,
governments are now looking at ways to stimulate the economy, and
the long-term appeal of renewable energy projects looks to be
favourable for policy makers.”– Kurt Sorschak,
President and CEO, Xebec Adsorption Inc.
Impact of COVID-19 on First Quarter and
Operational UpdateXebec was not immune to the worldwide
impact of COVID-19. The brief business interruptions in our
Chinese, Italian and Californian operations in March resulted in
shipment delays and consequently resulted in reduced revenues of
approximately $3.8 to 4.0 million in Q1/20. These shipment delays
in turn resulted in higher inventory levels. In addition, Xebec saw
a planned increase of its inventory levels at its Blainville
facility to ensure continued supply of critical manufacturing
materials and components in the changing environment.
Furthermore, efforts to contain COVID-19
increased operating costs and reduced productivity at all our
facilities due to the implementation of additional health and
safety measures. Xebec’s “Business Continuity Committee” worked
diligently to safeguard our employees, partners, and suppliers. To
date, we can report that Xebec has not experienced a single case of
COVID-19 throughout its worldwide operations.
With China restarting in mid-March, our Italian
operations in early May and shipments from our California
subsidiary having restarted in mid- April, our operational
performance is improving. Our manufacturing facility in Québec
continues to operate at near full capacity and has been deemed an
essential business.
Xebec continues to be well-positioned in the
event of future disruptions with its strong balance sheet that
includes $23.7 million of cash on hand (as of March 31st, 2020) and
a $10 million loan facility from the Fonds de Solidarité FTQ that
was recently announced. In addition, Xebec will receive additional
funds of approximately $14 million if its outstanding warrants are
exercised by July 4th, 2020.
Management Guidance for
2020 Despite the weaker than expected Q1/20 numbers, which
were primarily tied to our inability to ship products to customers
and recognize revenues, Xebec expects to continue its rapid growth
and improve its profitability in 2020. As a result, the company
maintains its previously announced guidance. With the support of
our strong order backlog of $89.9 million, we expect consolidated
revenues for 2020 in the range of $80 to $90 million, net earnings
of 7 to 9% and EBITDA margins of 11 to 13%.
More specifically, revenues in our Cleantech
Systems segment are expected to be $50 to $55 million and revenues
from our Industrial Service & Support segment are expected to
grow to $30 to $35 million with half of the revenue attributed to
acquisitions, and the rest to organic growth. Xebec does not expect
to record any revenues from our Renewable Gas Infrastructure
segment in 2020.
Cleantech SystemsDue to the
shutdown of our operations in China and Italy, which impacted the
shipment of products and site construction and commissioning
activities, revenue and gross margin profitability came in lower
than anticipated. Xebec expects a stronger Q2/20 as the company’s
operations in these markets have since restarted.
We regard quote activity as an early indicator
for future order activity. Our current quote log remained strong at
$937.0 million (as of March 13th, 2020), and our order backlog is
$89.8 million.
Xebec had recent success in the quarter with
$27.0 million in U.S dairy farm orders announced in February 2020,
which will be delivered over the next few quarters. We see this as
a reflection of more customers recognizing Xebec’s competitive
advantages which are lowest lifecycle costs and local service and
support offerings through our North American Xebec Service
Subsidiaries.
The company will continue to increase its effort
in Europe and North America to market and sell its new BGX
Biostream™ product to gain market share in the small to medium size
biogas upgrading segment.
Industrial Service &
SupportXebec continues to pursue organic and inorganic
growth opportunities. The company views acquisitions as a critical
component in supporting Cleantech System’s growth by providing
service and support throughout North America.
On December 10th, 2019, we announced our
2nd acquisition as part of this strategy, and we expect
another two to three acquisitions in 2020. The targeted
acquisitions are in the U.S and Canada.
Revenue growth and profitability were impacted
due to delays in product shipments to customers and restrictions in
providing on-site service and support to companies that were
closed. As economies begin to reopen and our acquisition strategy
continues, Xebec expects future quarters to be stronger.
Revenue in this segment is expected to triple
from $11.5 million in 2019 to $30 to $35 million in 2020, while
gross margins should start improving from around 30% toward the
targeted 40% range. In the first quarter we demonstrated being on
track for this target with gross margins of 37%.
Renewable Gas
InfrastructureXebec is in the final stages of formalizing
its first strategic investment partnership to actively participate
in renewable gas projects in Canada. This partnership will support
the growth of companies developing renewable gas and waste recovery
projects.
Xebec expects to announce this partnership
within the next few days, a key milestone in allowing Xebec to
rapidly scale up its efforts to invest in high-quality renewable
gas assets in Québec.
On February 18th, 2020, Xebec announced its
first renewable natural gas (RNG) infrastructure investment located
in Québec, Canada. The $28 million project will be an integrated
facility to process various organic wastes to produce renewable
natural gas and biofertilizer. The project continues to progress,
and the plant is expected to be commissioned by mid- to late
2021.
This project marked the start of Xebec’s newest
business segment, which aims to drive predictable recurring and
profitable revenue generation through 20-year Gas Purchase
Agreements (GPAs) with utilities, tipping fees and bio-fertilizer
sales.
Xebec to Host Live Investor Webinar to
Discuss Q1 2020 ResultsAn investor webinar for
shareholders, analysts, investors, media representatives, and other
stakeholders will be held today, May 27th, 2020 at 11:00AM EDT
(8:00AM PDT).
Register here:
https://app.livestorm.co/xebec-adsorption-inc/2020-q1-investor-webinar
A recording of the webinar and supporting
materials will be made available in the investors section of the
Company’s website at investors.xebecinc.com.
2020 First 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 March 31st, 2020, are available on the company’s website at
www.xebecinc.com or on the SEDAR website at www.sedar.com.
Related
links:https://www.xebecinc.com
For more information:Xebec
Adsorption Inc. Brandon Chow, Investor Relations Manager +1
450.979.8700 ext 5762 bchow@xebecinc.com
About Xebec Adsorption Inc.
Xebec Adsorption Inc. is a global provider of gas generation,
purification and filtration solutions for the industrial, energy
and renewables marketplace. Its customers range from small to
multi-national corporations and governments looking to reduce their
carbon footprints. Headquartered in Montreal (QC), Xebec designs,
engineers and manufactures innovative and transformative products,
and has more than 1,500 customers worldwide. With two manufacturing
facilities in Montreal and Shanghai, as well as a sales and
distribution network in North America, Europe, and Asia, Xebec
trades on the TSX Venture Exchange under the symbol XBC. For
additional information on the company, its products and services,
visit Xebec at xebecinc.com.
Cautionary Statement Neither
TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this
release. This news release contains forward-looking statements and
forward-looking information (together, “forward-looking
statements”) within the meaning of applicable securities laws. All
statements, other than statements of historical facts, are
forward-looking statements, and subject to risks and uncertainties.
Generally, forward-looking statements can be identified by the use
of terminology such as “plans”, “seeks”, “expects”, “estimates”,
“intends”, “anticipates”, “believes”, “could”, “might”, “likely” or
variations of such words, or statements that certain actions,
events or results “may”, “will”, “could”, “would”, “might”, “will
be taken”, “occur”, “be achieved” or other similar expressions.
Forward-looking statements, including statements concerning future
capital expenditures, revenues, expenses, earnings, economic
performance, indebtedness, financial condition, losses and future
prospects as well as the expectations of management of Xebec with
respect to information regarding the business and the expansion and
growth of Xebec operations, involve risks, uncertainties and other
factors that could cause actual results, performance, prospects and
opportunities to differ materially from those expressed or implied
by such forward-looking statements. Forward-looking statements are
subject to business and economic factors and uncertainties, and
other factors that could cause actual results to differ materially
from these forward-looking statements, including the relevant
assumptions and risks factors set out in Xebec's public documents,
including in the most recent annual management discussion and
analysis and annual information form, filed on SEDAR at
www.sedar.com. Furthermore, should one or more of the risks,
uncertainties or other factors materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking statements or information.
These risks, uncertainties and other factors include, among others,
the uncertain and unpredictable condition of global economy,
notably as a consequence of the Covid-19 pandemic, Xebec’s capacity
to generate revenue growth, the availability to Xebec of financing
and credit alternatives and access to capital, Xebec’s capacity to
meet all its other commitments and business plans, Xebec’s limited
number of customers, the potential loss of key employees, changes
in the use of proceeds relating to the loan, share price
volatility, and other factors. Although Xebec believes that the
assumptions and factors used in preparing the forward-looking
statements are reasonable, undue reliance should not be placed on
these statements, which only apply as of the date of this news
release, and no assurance can be given that such events will occur
in the disclosed times frames or at all. Except where required by
applicable law, Xebec disclaims any intention or obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise.
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