Anaergia Inc.

please press star followed by one on your telephone keypad. And to withdraw your question, it's star followed by two. It's now my pleasure to hand over to Darlene Webb to begin. Please go ahead when you're ready.

Thank you very much, operator, and good morning, everyone. On today's call, we'll be discussing energy as earnings in the first quarter of 2025, which ended March 31st, 2025. If you're following along with our slides, the questions and comments are directed to slides one through three. On slide two, you'll see that on our call today, I am joined by Mr. Asaf Khan, Energy as Chief Executive Officer, Mr. Greg Wolk, Energy as Chief Financial Officer, and Dr. Yaniv Sherson, Energy as Chief Operating Officer. Before beginning our formal remarks, we would like to refer you to slide three of the presentation, which contains a caution on forward-looking information and a note on the use of non-IFRS measures. Listeners are reminded that today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risk and uncertainties that could cause actual results to differ materially from those anticipated in these forward-looking statements. Energy does not undertake to update any forward-looking statements except if may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company's perspectives, which is filed with Canadian securities regulators. And with that, I'll turn the call over to Asaf.

Thank you, Darlene, and good morning, everyone. We are now on slide four. When I stepped into this role, we said that Energy would do three things, simplify the business, focus on execution, and restore financial discipline. Nine months later, guess what? We're doing exactly that through discipline, expansion, and our strategic growth. We said we would move towards a capitalized model. We have. We said we would grow our capital sales business. We are. We said we would control cost and stabilize operation. We're doing exactly that. Moving to slide five. It's quarter results, short progress we expected to make. In several key areas, we are ahead of where we plan to be. A capital sales performance is a past target. Our backlog has more than doubled compared to the same time last year, and that momentum continues to grow. It is not a one-time event. It reflects a steady commercial activity, the strength of our technology, and the ability to deliver. We are now on slide six. In Q1, we took deliberate steps to strengthen our capital market presence with energy on our trading on the old TCQX under the ticker ANRGF. This listing enhances visibility, improves accessibility for our US investors, and aligns with our focus of building long-term value through discipline execution. We are now on slide seven. The message is clear. We are executing. We are growing. And we are entering this year with strong momentum. We could not have reached this point without the people who make it happen every day. And the GR2.0 is more than a strategy. It is a shift in mindset. One that is now fully embedded across the company. Our teams are aligned. Our priorities are very clear. And across every part of the business, the focus is the same. Execution, accountability, and results. The progress we are seeing is not the result of one or two decisions. It is a product of consistent follow-through every day. We are not eating off. We are moving with purpose and maintaining the discipline that has carried us this far. We are proud of what we have accomplished to date. The signals are strong. And we believe we are well positioned to continue building a stronger and more resilient energy. Thank you. To take you through the numbers and execution, I will now turn the call over to Greg. Followed by Yannis. Thank you, Greg.

Thank you, Asaf. Good morning, everyone. Let me take you through the financial results for the three months ended March 31, 2025. On slide 89, revenue for the first quarter was $24.9 million. A modest decrease of .4% or 93,000 compared to the same period in 2024. This minor decline was primarily due to a slightly lower capital sales and food revenue. Partially offset by an increase in O&M services. Regionally, we saw a decrease in revenue in APAC and Italy. While North America grew, supported by new capital sales projects and increased service activity. Gross profit for the quarter was $5.4 million, down .6% or 1.1 million compared to 6.5 million in Q1 2024. Overall gross margin for the quarter was 21.7%, down 4.3 percentage points compared to 26% in the same period last year. The overall decrease was driven mostly by lower profitability in the food segment that was partially offset by a larger increase in the capital sales gross profit. Capital sales gross profit margin more than doubled at .8% in Q1 2025 compared to .1% in Q1 2024. This is our core business in our new capital light model. I'll take you over to SG&A. SG&A expenses for Q1 2025 were $17.2 million, an increase of .4% or $569,000 from $16.6 million in Q1 2024. The increase was primarily due to specific $2.95 million reserve against account and feeable balance. Excluding that item, SG&A would have declined .3% to 14.2 million, reflecting continued progress on ongoing cost reduction efforts. Net loss for the quarter was $5.9 million, a .6% or 5.7 million improvement compared to a net loss of $11.5 million in Q1 2024. This was primarily driven by increased government grant income recognized during the quarter, along with continued reductions in SG&A expenses, excluding the specific account feeable reserve. Adjusted EBITDA for the quarter was a loss of $3.9 million, reflecting an improvement of 34.5%, down $2.1 million from $6 million loss in the same period last year. This improvement was primarily driven by the decrease in net loss, as well as addbacks of RIVF income tax credit transaction costs in the first quarter of fiscal year 2024 that did not reoccur in the current quarter. Slide 10. As of March 31, 2025, our total revenue backlog increased 94% to a record of $200 million, from $103.1 million at year end 2024. This increase reflects strong execution of new contracts in Q1, specifically in Italy and North America. Of our current backlog, $182.4 million is attributed to capital sales and $17.6 million to long-term O&M services. This backlog is measured under our refined definition, which includes only signed capital sales contracts and three years of modeled revenue for multi-year O&M agreements. We are highly encouraged by our growth and backlog and the project execution that will begin to follow. In addition to this backlog growth in Q1 2025, we continue to be awarded other new significant contract wins, which we have publicly announced since the end of the first quarter. It reinforces the momentum we are seeing in key markets and supports our expectations for continued growth. We are now on slide 11. In Q1, we also successfully added a financial arrangement that has been a valuable support tool for our growth. On February 5, 2025, we entered into a new $13.9 million line of credit with the Royal Bank of Canada, guaranteed by Export Development Canada. The facility is valid through January 31, 2027 and is intended to serve as collateral for letters of credit required on certain capital sales contracts. In summary, our Q1 performance reflects operational discipline and continued progress under Energy of 2.0. We delivered a meaningful improvement in net loss and adjusted EBITDA, lowered SG&A costs, excluding the specific accounts to be reserved, and now have a record backlog that has nearly doubled since year end. Our trajectory is clear. We have reshaped the business with focus and intent to become capital light, leaning into capital sales strategy, and a return to our core of technology, engineering, and execution through the strength of our people. With that, I'd now like to turn the call over to Yannis for an update on operations and project execution. Yannis?

Thank you, Greg. We're now on slide 12. Our focus this quarter remained on disciplined execution through delivering projects on time and on budget and deepening relationships with key partners in strategic markets. We are seeing the success reflected by our growing backlog and new opportunities coming to us, particularly from top tier customers with multi-project orders. Let me walk you through several of the highlights. In Italy, we continue to build momentum. In January, we signed a binding agreement with TechBow to construct five new biomechanical facilities across southern Italy. Valued at more than $27 million, this agreement sees Energy as supplying our proprietary anaerobic digestion technologies and core equipment, while TechBow leads construction. These plans are expected to be connected to the gas grid by mid-2026. In March, we received formal notice to proceed from the city of Ferdinand, Italy for a new municipal waste treatment facility. Valued at approximately $9 million, the facility will include anaerobic digestion to process more than 35,000 tons of source separate organic annually. It's expected to generate approximately 31,400 megawatt hours of biomethane per year, which will be converted into renewable compressed natural gas for vehicle fueling. The project further expands our municipal footprint in the region. Commissioning is targeted for mid-2026. And just days later, our Italian division signed contracts with entities owned by QGM to deliver two additional biomethane projects in northern Italy, located in Comparo and Del Rovere. Each facility is expected to process more than 50,000 tons of agricultural waste annually. Together, these projects represent a combined contract value of more than $46 million. Energy is serving as the engineering, procurement, and construction contractor and technology provider for both sites, which are expected to be operational by mid-2026. Together, these initiatives significantly strengthen our position in Italy and demonstrate growing demand for energy solutions across both municipal and agricultural applications. They also reflect the growing momentum behind the Repower EU incentives aimed at accelerating renewable natural gas adoption across the European Union. Now over to Japan, our Singapore-based subsidiary signed a letter of intent with JGC Holdings, one of the country's leading engineering firms, to deliver a facility that will convert 61,000 tons of organic waste annually into 1.7 million cubic meters of renewable natural gas. With Japan's Clean Gas Certificate system and 2030 carbon neutral gas targets now in place, we are well positioned to support one of Asia's most ambitious clean energy transitions. In Singapore, we continued delivery of the Integrated Waste Management Facility, a multi-phase capital project located at the Tuazu Basin. The project is approximately halfway complete and once operational, will serve as the largest outlet for food waste recycling in Singapore. This initiative is part of Singapore's long-term strategy to integrate waste and wastewater infrastructure. And in North America, we are advancing upgrades at the Renewable Energy Anaerobic Digester, or REED, facility at the University of California, Davis. Supported by a grant from Cow Recycle, this more than 7 million project will increase throughput and system reliability. These improvements help California meet their SD1383 targets for methane reduction and organic waste diversion, while strengthening our long-term partnerships with UC Davis. Across all active and planned sites, our customers are leveraging our deep know-how and vertically integrated capabilities across engineering, technology supply, construction and operations to ensure project success. We are also continuing to advance our -on-operate platform. We're now on slide 13. Our Southern California facility, Soka Baomethane, continues to operate profitably and serves as California's first code-adjusting plant injection gas to the grid. In Q1, we completed upgrades that expand food waste code-digestion capabilities. At the Rhode Island Bioenergy Facility, the plant is running stable with continued ramp up and delivering renewable natural gas to Irving Oil in Canada, with participation in Canada's Clean Fuel Regulation. It remains the largest anaerobic digester plant in New England. In our boost segment, revenue was 4 million, down modestly from 4.1 million in Q1 2024. This slight decline reflects the planned idling of our Charlotte facility in February, a decision made to reduce operating losses and improve project economics as we prepare the site for future conversion to RNG. Both Charlotte and Riverside remain in development. Charlotte continues in a temporary idled state as we complete permitting and advanced construction planning. Riverside is progressing through pre-construction with development work underway under an existing capital sale contract with the City. These sites remain important to our long-term -on-operate strategy, and we are taking a disciplined approach to ensure their success. Together, these updates illustrate not only the progress we're making project by project, but also the consistency of execution that now reflects Energy at 2.0. Moving to slide 14. None of this progress would be possible without the people who represent Energy every day, on-site, in meetings, and on the front lines of delivery. They are the face of our company to our customers and partners. The pride they bring to their work is reflected in the trust we're earning and in the momentum we are building around the world. Their focus on execution, accountability, and results is what drives Energy at 2.0 forward, project by project, milestone by milestone. We're seeing the strength of that execution reflected in our backlog, which as you have heard now, stands at 200 million. That momentum is being driven by the consistent delivery of projects, strong partner relationships, and the confidence we're building in key markets. Our focus remains on converting that backlog into results efficiently, reliably, and at scale. And with that, I turn the call back to Asaf for closing remarks. Asaf?

Thank you, Anif. Today's results speak to more than a strong quarter. They reflect a company that is aligned, disciplined, and moving in the right direction. We are building momentum, not with noise, not with promises, but with results. Energy at 2.0 is not a pivot. It's a commitment to performance, to accountability, to delivering what we said we would do. Energy at 2.0, no talk, execution. With that, Darlene, I'll turn back the call to you.

Thank you, Asaf. Operator, we can now open the call to questions.

Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. To withdraw your question, it's star followed by two. Our first question today comes from Craig Irwin from Roth Capital Partners. Your line is now open. Please proceed.

Good morning and thank you for taking my questions. First, I should start by saying congratulations on the impressive growth and backlog. A big achievement. If we dig down into the bookings there, you gave us three projects that are pretty substantial. TechBow, Fermo, and then Northern Italy. I'm going to mispronounce the partners names there. The $46 million booking. If we actually take those out, you doubled sequentially, right? If we take those out, it looks like you still have a mid-teens growth rate sequentially in the backlog. Can you maybe talk to us a little bit about the diversity of projects that you're booking equipment for? Are these projects smaller in nature or larger? Is this kind of positive event something that you think is sustained over the next two quarters?

The project we have is actually a mix and match. Okay, we have some projects that are smaller. We have quite a very large projects that we have already signed. And the bottom line is that the market is booming and we are right on the correct path of making sure that Energia is known to everyone. So as far as we are concerned, this is a people tier, you know, this is a year that we can show our growth. Yannick, maybe you can help me here?

Yeah, of course. Thanks for the question. So a couple points to highlight. The backlog reflects trailing bookings that we're still executing predominantly from North America and Europe. From 24 carrying into 25. And the project that you see now being booked, we do believe that they are going to be sustained from multi-quarters. And the reason being is that we're seeing a trend of multi-project orders from single customers, particularly in the case of Europe and also in the U.S. and our municipal segments. An example of some of the announcements that we've made are major players, utilities or IPCCs in Europe that have committed to ordering multiple projects, two, three, nine type numbers. And we're seeing this tailwind continue in Europe, particularly backed by the repower EU incentives and increasing demand, particularly in the Iberia region that is very much untapped and we're very strategic positions, Iberia and Italy, for the sustainability certificates of sustainability. So as far as project size, we don't expect any change in follow on future bookings of projects that are both in the sub 10 million and in the above 20 as we move forward. Both as I said in the private agricultural sector as well as the municipal sector.

Understood. Understood. So then you use the word untapped, which I kind of like. Can you maybe frame out for us how busy you are addressing potential customer projects north of $25 million in potential commitment?

Yeah, of course, you know, can't give specifics for projects we haven't announced since, of course, but certainly there is large regions in the places in Europe, particularly where we are building now that I say untapped because there are feedstocks. These regions are fairly underdeveloped as far as just counted by gestures. Portugal, Spain, Italy in particular, and are backed now in the case of Italy by a continued government support for a government backed incentive scheme that has continued for a number of years now and that we are taking advantage and leveraging for our customers. As well as our presence there with references that are successful and being known as a dominant player with industry leading experience. So the driver in Italy is really a government backed incentive scheme that the government has continued to support. In the Imbéria, Portugal and Spain, there's really an untapped market and we are very strategic with positions. Much fewer digesters in this area. They haven't traditionally been backed by government programs, but they're in strong incentive from Repower EU Directive and demand for that renewable natural gas or biomethane, as we call it in Europe, is booming. And so it's leading major players like major utilities to get into the space who are partnering with us because of our experience. And so to state the obvious, we are extremely busy, particularly in Europe. And our main focus is sustainable growth, ensuring that we are getting the resources in place so we can execute successfully because it's an unprecedented wave that we're seeing in these markets. Again, places that historically have had few project counts.

Understood, understood. So then financials question, right? I know you've worked hard this last year to bring down your operating expenses and to make sure that where you are spending money, it's directly facing the opportunities that can deliver a credible return. You know, the 17-2 and SG&A in the quarter, is that really sort of a fair base level of spending for us to expect, you know, maybe an increase over the next couple quarters, you know, as 2025 unfolds? Or was there anything maybe one time in nature where we could see SG&A spending trend down?

Yeah, correct.

Yeah,

for the quarter we had, we did a reserve for specific constraintable, about close to 3 million. So to take that out, you know, our run rates in the 14 range for the quarter, I would say our run range going forward is somewhere probably a little bit north of that, but it's probably, I'll call it 15-ish or so, you know, if you wanted to level set it, maybe slightly under, but that's where we would see it in general. We don't really give guidance, but, you know, and if you take this quarter and you take that one time out, then you see where we're at for the quarter. And we don't expect increases in SG&A. We expect to continue to work on reductions there and just right size the business as we move forward. In addition to the other comment, you know, we have increased spending in areas such as sales, and that's why geographically we continue to spread out our footprint. We talk about project work. We have large projects, as you noted. We also have a lot of smaller projects, a lot of EP type work. So, you know, from our standpoint, the EP work we'll do anywhere in the world because we can do it from any of our locations from the US, from Italy, from Singapore. And use our engineering services from most places. Our equipment sales then can be shipped in for that, for the product side of it. And so we really enjoy the EP side of the work, and that could be five to ten million dollar type projects. That's a really good comfort zone for us. It's good work. And we like that, especially within areas we don't have. You know, we can do EPC and we'll do that in the US and some in Europe. That's only because we know the contractors that can do the larger projects with us. Outside of that, the EP work that we receive throughout the world with the seed money we planted in different regions is very instrumental for us. Now we have a much further reach and we can now leverage all of the offices that we have in the engineering side. And our procurement can happen and then we send some people over for the commissioning part of it. That's really the global strategy. And we will take on the bigger projects, like I said, in the US and Europe.

Excellent, excellent. Then last question, if I may. I know your first quarter is often impacted by either mix or the early shipments into new projects that are going to be a more material contribution over the year. Can you talk us through the sequential or year over year margin progression? Was there anything specific in there from a project basis or from a mixed basis that was a delta versus these other comparable quarters? And how do you feel about the margin trajectory over the course of the year?

We're very positive on the margins over the rest of the year. This quarter overall margins were down a little bit as noted. Our capital sales margins remain in the, obviously we were at .8% in this quarter if you look in the MD&A, which was out last night. But that really where we suffered a bit this quarter was just some of our Boo assets, or as we continue to ramp up on a few of those. So that has been a little bit of a drag on our overall margins. But our core business of cap sales is very strong. We're very, very comfortable with where we're at on the margin side of that business. And as you see in our backlog, that's the majority of our forward work. So the Boo assets will continue to ramp up and become more of a contributor to our overall margin. But that's a little bit of a drag that we had in the first quarter on our overall gross margins. But again, our cap sales margin, which is really what we're moving towards, is very strong.

Understood. And actually, if I can squeeze one last one in. I have not yet seen this in MD&A. I need to review it more carefully. But did you share a 12-month backlog number for the $200 million print that you gave us? I mean, is there anything you maybe can share if it's not in the MD&A discussion?

We don't share a forward-looking backlog number, obviously, but because we don't know where we're going to end up at. Well, we know internally, but we don't share that piece. However, those projects that we have on there, the duration of those can be anywhere from, I mean, some of the smaller EP work could be probably like 8 months, 12 months, maybe somewhere in that range. And the other bigger projects could be 18 months to 24 months. So there's a runoff. And as you know, with construction, there's that bell curve. As you start ramping up, it's a little bit slower at first, and then you get heavily into it. And then at the end, there's always a slower tail. But that's where we see it. So this is, our goal is to continue to build backlog, continue to actually start execution on projects that we just rewarded, as well as our core business. And then

that

pipeline of backlog growth will add the consistency to our numbers and our growth over time. And that's really the strategy here. And I think as you, Niamh, had mentioned, the market is very, very young in this area, and the opportunities are everywhere. And with our geographical footprint now, it's getting better and better for us to see what's available in markets that we were not in before. And again, with a low-risk EP type project work that we can come in with, it's a really good formula.

Great. Well, congratulations on the strong business capture. I look forward to seeing you guys generate some profits. I think that's not too far out. So thank you.

Thanks, Greg.

Thank you. Our next question today comes from Adam Forsythe from Longsperr Capital. Your line's now open. Please go ahead.

Thanks very much. And thanks everybody for the call so far. First question, just going back to that margin point, I did wonder, it does feel a lot like Mix and really very much a quarter story. But looking forward, I wonder, are there any particular supply chain issues that are either areas of concern for you or even areas which we might see things improving in either side of the business? And then my second question, just a little more general one, the Italian projects you have using agricultural feed stock, are any of these under the Biogas Done Right program, the one using cover crops as part of crop cover cycling, or are they just really all just pure agricultural waste?

Thanks. Projects are agricultural waste. Yeah, the projects are agricultural waste predominantly. And the supply chain issues certainly have been a risk that we've mitigated quite extensively. You know, energy's advantage is global presence and procurement options. We have, you know, we always keep the rolodex of multiple vendors to pivot to should, in the event of a delay or supply chain issue with any particular piece of equipment. As you know, we also vertically integrated and manufacture ourselves key components, which gives us much more control on schedule and quality of delivery and helps us navigate to competing priorities. And thirdly, and lastly, that, you know, the one of the biggest powers we have here is the buying power with multiple projects. And so the scale is a tool to our benefits of improving margins on our projects with multiple simultaneous orders with discounts as an example, and giving us a greater advantage than we've had in the past to control supply chain, mitigate risks with supply chain and costs.

That makes a lot of sense. And nothing on, I mean, one area we've seen in the past from some other people is compressor costs. To the extent that, you know, that's an issue for you. Has that been a problem in the past and are you seeing things coming down there?

The answer is, yeah, prices, you know, demand's going up. So, you know, as I said, particularly in Europe. So, yes, we are dealing with cost variability. We have strategies with multiple vendors, multiple geographies that we can procure and manufacture. And ultimately, we've also done a pretty good job of pre-ordering to lock in our orders and our inventory in advance to mitigate those risks, because we have high confidence as evidenced by the releases in Q1 of large orders coming down the pipeline.

Sure, sure. That's great. That's really helpful.

Thanks. Thank you. We have no further questions in the queue at this time, so I'll hand back over to Darlene Webb for some closing comments.

Thank you again, operator, and thank you everyone. As always, for additional information, or should you have any questions, please contact the IR team at IR at Energia.com or visit us online at Energia.com. Thank you all again for your time today. Operator, you may now end the call.

Thank you. That concludes today's call. You may now disconnect your line.