Anaergia Inc., a company that offers integrated waste-to-value solutions to reduce greenhouse gases by cost-effectively turning organic waste into renewable natural gas, fertilizer, and water, announced its financial results for the three- and nine-month periods ended September 30, 2022. All financial results are reported in Canadian dollars unless otherwise stated.
Anaergia’s third quarter results show yet another healthy increase in revenues. Not yet reflected in our financial results is the performance of a number of our build-own-operate (“BOO”) renewable natural gas (“RNG”) facilities that are ramping up and those that will start operating by the end of this year.
During 2022, there have been multiple new regulatory initiatives introduced across North America and Europe that call for long-term RNG supply increases. While the pace of implementation of these initiatives is slower than anticipated, they are expected to drive growth opportunities for Anaergia.
“Anaergia is continuing to see increasing market tailwinds since the Company’s initial public offering last year,” said Dr. Andrew Benedek, Chairman and CEO of Anaergia. “While moves towards net zero and saving the environment are gaining momentum worldwide, the added themes of energy security, and higher energy prices, each compound the favourable demand trends for our unique capabilities. The world is on a path to build an energy sector with net-zero emissions. This is an enormous global challenge that requires strong and credible policy actions from governments. While the pace of these actions will be somewhat unpredictable, Anaergia is uniquely positioned to act as policies materialize, with the ability to deploy commercially proven technologies quickly and at scale with a strong pipeline of new BOO projects.”
Q3 2022 Financial Results
Third Quarter financial highlights:
• Revenues for the third quarter of 2022 (“Q3 2022”) rose 60% to $44.5 million from $27.7 million for the same period in the prior year and rose 47% to $122.2 million for the nine-month period ended September 30, 2022 (“YTD 2022”) from $83.2 million for the same period in the prior year. The increase was driven primarily by Capital Sales projects under execution in the Europe, Middle East and Africa (“EMEA”) market.
• Gross profit percentage for Q3 2022 increased slightly to 23% from 21% for the same period in the prior year. The uptick in profitability in the quarter was primarily driven by higher revenues. For YTD 2022, the gross profit percentage declined to 21% from 23% for the same period in the prior year owing to project cost overruns earlier in the year.
• Net income (loss) of ($0.7) million for Q3 2022 was driven by income tax expense and losses in equity-accounted investees. For YTD 2022, ($23.6) million of the ($36.8) million net loss was primarily from losses from changes in the fair value of derivatives (for example, in the value of the option to refinance debt of the Rialto Bioenergy Facility (“RBF”)).
• Adjusted EBITDA of ($1.0) million for Q3 2022 was an improvement from the ($1.6 million) (adjusted) for the same period in the prior year. The change was mainly attributable to the increase in revenues in the quarter. For YTD 2022, Adjusted EBITDA of ($6.6) million was down from ($0.8) million for the same period in the prior year, mainly driven by lower gross margin and higher SG&A expenses as the Company continues to position itself for future growth.
Three months ended:
Fiscal 2022 and Fiscal 2023 Guidance Update
Relative to prior disclosure, Fiscal 2022 guidance for both Revenue and Adjusted EBITDA has been revised to reflect both the performance for the first nine months and tempered growth expectations for the remainder of the year. As YTD revenues are already approximately equal to Fiscal 2021 revenues, Management expects Fiscal 2022 to show healthy revenue growth of approximately 25% to 35% compared to Fiscal 2021, to between approximately $160 million and $170 million.
This is a reduction from previous Fiscal 2022 revenue guidance. The prior forecast assumed revenues would accelerate each quarter and be particularly high in Q4 2022, largely due to the contribution of BOO projects. Both the RBF and SoCal facilities were expected to be operating at close to full capacity with sales of RNG during the quarter, as were the majority of the BOOs in Italy. Revised outlook reflects a delay in the contribution of the RBF due to the delay in ramp up of feedstock supply to the facility as well as delayed completion of final registration under the federal RIN and LCFS programs which will allow the facility to commence planned sales of RNG. The commencement of such sales is not expected to occur until the end of the fourth quarter. In addition, the timing of capital sales and project execution in both North America and Europe have been behind previous estimates, largely due to client-driven delays that have slowed progression of certain projects.
Management expects Fiscal 2022 Adjusted EBITDA to be approximately ($10) million. The reduction from prior guidance is attributable to the lower expected revenue, and the erosion of gross margin due to cost inflation and higher SG&A as the business works to advance projects.
Management believes there are significant prospects for growth for the Company in Fiscal 2023 and in subsequent years. Nevertheless, with significant macro-economic changes, particularly in interest rates and natural gas pricing, as well as Company-specific matters, including but not limited to the construction and commissioning schedule for BOO projects, management has decided to withdraw the Company’s previously disclosed Fiscal 2023 guidance. Management intends to review key assumptions used to generate its guidance before providing any further updates.
