Xebec Adsorption Inc. (TSXV: XBC) ("Xebec"), a
global provider of renewable gas solutions is pleased to announce
today its 2020 second quarter and six-month periods results,
with the following highlights:
- Record revenues of
$19.6 million in the second quarter of 2020 compared to $12.8
million for the same period in 2019, a 53% increase.
- Negative EBITDA at
$0.1 million for the second quarter 2020 compared to a positive
$1.8 million for the same period in 2019.
- Net loss of ($0.8)
million or ($0.01)/share for the second quarter 2020, compared to a
net profit of $1.0 million or $0.02/share for the same period in
2019.
- Working capital
increased to $87.2 million on June 30, 2020, for a current ratio of
6.5:1 compared with working capital of $36.9 million and a 3.2:1
ratio on December 31, 2019.
Financial Highlights:
|
|
|
|
|
|
|
|
Three months ended June 30, |
% of Change |
Six months ended June 30, |
% of Change |
|
2020 |
2019 |
|
2020 |
2019 |
|
(In millions of dollars) |
(unaudited) |
(unaudited) |
|
(audited) |
(audited) |
|
Revenues |
19.6 |
12.8 |
53 % |
31.8 |
22.5 |
41 % |
Gross profit |
4.3 |
4.0 |
8 % |
7.3 |
7.3 |
- % |
Gross profit as a percentage
of revenues |
22% |
32% |
|
23% |
33% |
|
EBITDA
(1) |
(0.1) |
1.5 |
|
0.5 |
2.2 |
|
Adjusted EBITDA
(2) |
(0.1) |
1.8 |
|
0.3 |
2.8 |
|
Net income (loss) |
(0.8) |
1.0 |
|
(1.5) |
1.4 |
|
Net income (loss) per share -
basic ($/share) |
(0.01) |
0.02 |
|
(0.02) |
0.03 |
|
Weighted average number of shares |
88,884,226 |
58,116,344 |
|
87,086,137 |
57,648,164 |
|
As at: |
|
|
|
June 30, 2020 |
Dec. 31, 2019 |
|
Total assets |
|
|
|
113.5 |
64.5 |
|
Total liabilities |
|
|
|
33.5 |
25.5 |
|
Equity |
|
|
|
80.0 |
39.0 |
|
As at: |
|
|
|
August 10, 2020 |
August 12, 2019 |
|
Backlog |
|
|
|
85.5 |
63.5 |
|
(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 $31.8 million for
the six-month period ended June 30, 2020 compared to $22.5 million
for the same period in 2019, a 41% increase. The increase is mainly
explained by the higher volume of major cleantech contracts and
acquisition of a service company.
- Gross profit of $7.3 million or 23% of
revenues for the six-month period ended June 30, 2020 compared to
$7.3 million or 33% for the same period in 2019. The company had a
lower gross margin in the cleantech segment due to investments in
product standardization and higher construction costs for sites
impacted by COVID regulations.
- Net loss of $1.5 million or ($0.02) per share
for the six-month period ended June 30, 2020, compared to a net
profit of $1.4 million or $0.03 per share for the same period in
2019, a deterioration of $2.9 million. The decrease is mainly
explained by a reduction of gross margin, an increase of SG&A
and the reduced productivity caused by the COVID-19 pandemic.
- Positive EBITDA of $0.3 million for the
six-month period ended June 30, 2020, compared to $2.9 million for
the same period in 2019, a deterioration of $2.6 million.
- Backlog increased by $22.0 million, from $63.5
million on August 12, 2019, to $85.5 million on August 10,
2020.
- Selling and administrative expenses increased
by $3.6 million in the six-month period ended June 30, 2020
compared to the same period in 2019. This is primarily due to
an organizational scale-up of employees and associated costs to
support the increased level of sales, order backlog and quote
log. Also included are the costs of acquisition, up list to
TSX by end of 2020 and the implementation of an ERP system.
- As of June 30, 2020, the company had $60.0 million of cash on
hand compared to $22.4 as of December 31, 2019 and positive working
capital has increased to $87.2 million compared to $36.9 million on
December 31, 2019.
- On June 26, 2020, Xebec closed a bought deal public offering of
units at a price of $3.60 per unit for aggregate gross proceeds of
$29 million.
CEO Quote:“Q2 was a challenging
quarter and I’m proud to see the resilience Xebec has displayed.
COVID-19 is to a certain degree catching up with Xebec and even
though we were successful in continuing to grow the top line during
the first 6 months of 2020, we had to incur higher costs in order
to achieve that growth. These higher costs combined with the
additional overhead expansion for our organizational build-out in
Europe, North America and China has led to increases in our
SG&A. The current revenue does not yet reflect the full revenue
potential of these investments in our organization and consequently
we are seeing an impact on our short-term earnings ability,
especially since we are also confronted with higher direct costs to
generate the revenue, which in turn has reduced our targeted gross
margin in Q2.
We are consequently increasing the focus on our
overall gross margin generation, for which our target is the low
30% range, and we are working to achieve SG&A below 20% of
revenues. We expect to achieve more operating leverage as our
revenues will increase in the quarters to come.
There are a number of investments we are
currently making, such as the implementation of 52-109. These are
exchange rules that are required to govern internal controls for
companies listed on the TSX mainboard. We are also in the process
of a planned migration of our inhouse server-based Enterprise
Resource Planning (ERP) system to the latest cloud version. The new
ERP software will allow us to connect all our subsidiaries to our
ERP system and manage all data centrally through this program. As a
result, we will have better business control and business
intelligence as we move into 2021.
Furthermore, we have been working on our first
“Sustainability Report” for 2019. We have chosen to base our
reporting of our material ESG issues on the standards of the
Sustainability Accounting Standards Board (SASB) for the
Industrial Machinery & Goods industry of the Resource
Transformation sector, as defined by SASB’s Sustainable Industry
Classification System®; these serve to determine the specific
material ESG issues we will report on. This first report will form
the baseline for future annual reports on our sustainability
efforts, and will hopefully lead to better environmental, social
and governance related outcomes. We expect to issue our first
report later this month.
Due to the Cleantech order scale up, we have
decided to introduce a night shift at our Blainville, Québec
facility in July of this year. This has consequently increased our
production and support staffing and we are in the process of
ramping up this increased capacity. This capacity expansion will
allow us to continue to grow our revenues as planned.
I am also pleased to report that we are seeing
solid demand for our hydrogen technologies and that we are on track
to generate about $15 to 20 million in hydrogen sales in 2020.
We continue to see a positive backdrop for the
industry as climate change comes back to the forefront of people’s
minds and governments look to stimulate their economies. Xebec is
in a strong position to take advantage of these new opportunities
as we aim to decarbonize and achieve a zero-carbon future.”- Kurt
Sorschak, President and CEO, Xebec Adsorption Inc.
Current Market and Guidance for
2020Our market outlook for renewable natural gas
and hydrogen purification equipment under our Cleantech Systems
remains unchanged from our previous guidance. We expect our
Industrial Service and Support segment to continue its revenue
growth in line with our strategy.
We maintain our revenue guidance of $80 to $90
million but retract our earnings and EBITDA guidance. Xebec expects
to be profitable on a net earnings and EBITDA basis for FY2020 but
given the results of the first two quarters, we are unable to
maintain the previous guidance. Execution and organizational
development will be key for continued growth. Management recognizes
this and is focused on operational performance and the creation of
an environment that will allow the company to scale. We are working
on expanding our managerial capabilities, building strong,
results-driven teams that will deliver on future opportunities.
Cleantech SystemsOur Cleantech
segment continues to expand. We have signed several Letters of
Intent (LOI) for renewable natural gas (RNG) systems during the
course of Q2, and we have received a number of orders for hydrogen
purification. We have also signed a significant order for helium
purification with a large industrial gas client. In addition, our
short-term order outlook looks very positive, which will lead to
further solid order flow in Q3.
Europe has been slower than expected, mainly due
to the COVID-19 shut-down of most of the European economy during
Q2. We expect that Italy will remain weak for the rest of the year,
but we expect further growth in France. We continue to guide for
Cleantech revenue in the $50 to $55 million range, but we are
seeing lower than anticipated margins in the larger biogas plants
as we invest in the standardization of these designs. Our
engineering and supply chain teams are working on complexity
reductions and sourcing synergies between different product
platforms, which will allow us to generate Cleantech margins in the
25% to 30% range. Lastly, we regard quote activity as an early
indicator for future order activity. Our current quote log remained
strong at $1.05 billion (as of August 10th, 2020), and our order
backlog is $85.5 million.
Yesterday, we announced a partnership with
CarbonQuest which has opened a new application for our purification
and separation technologies. Although in the early stages, this
initiative could open another large-scale market for Xebec as NYC
building owners look to reduce their exposure to the new Local Law
97 or face significant penalties that increase in severity over
time. There are over 60,000 buildings in NYC alone that could
benefit from the carbon capture solution we are co-developing, and
we look forward to providing updates on this in the future.
Industrial Service &
SupportXebec continues to pursue organic and inorganic
growth opportunities and expects to grow revenues from $11.5
million in 2019 to about $30 to $35 million in 2020. Our current
run rate for industrial service and support revenues is
approximately $25 million, and we expect to close 2 more
acquisitions within the next 60 to 90 days. As a result, Xebec is
on track to hit revenue guidance of $30 million+ range for FY2020.
In Q2/20 we achieved a gross margin of 37%, somewhat lower than the
targeted 40%+. As our purchasing power increases, we should be able
to improve the margin into the targeted range.
Renewable Gas InfrastructureOn July 3rd, 2020
the Québec government announced its organic material management
plan with a target to recycle or recover 70% of organic waste in
the province by 2030. In conjunction with this target, the province
earmarked $1.2 billion in funding to support municipalities and
private companies with the build out of organic matter collection
services and processing facilities. In addition, there is a
specific program (PTMOBC) for the treatment of organic materials by
bio-methanation (RNG production) and composting, whose budget will
be increased by $308 million. In addition, the Québec government
announced on July 4th, 2020, its commitment to provide $70 million
in funding for RNG projects.
These developments are positive for Xebec’s
recently announced fund (GNR Québec Capital L.P.) with the Fonds de
solidarité FTQ. This new investment vehicle aims to increase
renewable natural gas (RNG) production in Québec and when fully
capitalized and appropriately leveraged, could fund 12 to 15
renewable natural gas projects in the province.
Overall, the fund’s development is progressing
well with three key hires being finalized. In addition, the first
RNG project (announced in February 2020) is in the process of being
rolled into the fund. This first project is located in the Eastern
Townships and will process 45,000 tons of organic waste per year,
generate 150,000 GJ of RNG and produce 7,500 metric tons of
biofertilizer annually. Lastly, there are several projects being
evaluated for investment and Xebec expects activity to pick up as
the new hires assume their positions.
Xebec to Host Live Investor Webinar to Discuss Q2 2020
Results An investor webinar for shareholders, analysts,
investors, media representatives, and other stakeholders will be
held today, August 11, 2020 at 11:00AM EDT (8:00AM PDT).
Register here:
https://app.livestorm.co/xebec-adsorption-inc/2020-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 investors.xebecinc.com.
2020 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 six-month period ended
June 30, 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 5762bchow@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) accept
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 the global economy,
Xebec’s capacity to generate revenue growth, a limited number of
customers, 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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