Greenlane Renewables Inc.

Good afternoon, ladies and gentlemen. Welcome to the Green Lane Renewables, Inc. second quarter 2023 results conference call. At this time, all participants are in a listen only mode. Following the results, we will conduct a question and answer session. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. Today's call is being recorded and a replay will be available on the GreenLane website. I will now turn the call over to Darren Seed from Insight Capital Markets. You may begin your conference.

Thank you, Operator, and good afternoon. Welcome to the GreenLane Renewable Second Quarter 2023 Conference Call. I'm joined today by Brad DeVille, GreenLane's Chief Executive Officer, and Stephanie Mason, GreenLane's Director of Finance. Sitting in for Monty Balderson. Green Lane's Chief Financial Officer, who's unavailable today due to medical reasons. Before beginning our formal remarks, we'd like to remind listeners that today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that can cause actual results to differ materially from those projected in these forward-looking statements. Green Lane Renewables does not undertake to update any forward-looking statements except as may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company's annual information form, which has been filed to the Canadian securities regulators. Lastly, while this conference call is open to the public and for the sake of brevity, questions will be prioritized for analysts.

Now, I'll turn the call over to Brad. Thank you, Derek. Good afternoon, and thank you, everyone, for participating on today's call. I'd like to start off with a brief recap of our business progress and updated outlook along with some industry commentary before I turn the call over to Stephanie for a more detailed review of the numbers. During the second quarter, we continued to work toward our goal of becoming cash flow and adjusted EBITDA positive in the next nine months. Our plans include streamlining the number of products we offer across each of our three product lines rooted in each of the three core upgrading technologies namely water wash, pressure swing absorption, and membrane separation. Our plans also include ramping up sales of our proprietary biogas desulphurization products outside of Europe from the strong base of sales we currently enjoy within Europe. With this more focused product portfolio approach, we are targeting the different market segments where each of Greenlane's products are most attractive to customers and partners and can realize volume opportunities. At the same time, we are continuing to invest this year in the necessary systems and processes that will allow us to scale the business as we take on more of these contracts. Our agreement with ZEGG Biogas is emblematic of the type of opportunity that will create operating leverage in our business. During the quarter, we announced an exciting collaborative agreement with ZEGG Biogas, a company 50% owned by Vibra Energia, previously the fuel distribution unit of Petrobras. Under the agreement, ZEGG Biogas is to establish industrial-scale volume production of one of GreenLane's largest and most popular upgrading products in Brazil. ZEGG Biogas' goal is to deliver 75 of these systems over the next five years. To put that in perspective, that represents installing more biogas processing capacity in the next five years than the more than 140 units GreenLane has delivered over the past 30 years. ZEGG Biogas will phase in production capacity over time, and the agreement includes minimum volume commitments in the first two years. This transaction is a shift in our standard business model. It provides revenue under a new royalty-like business model, together with a supply of components from outside of Brazil and ongoing local service contracts. In addition to the ZEGG biogas deal, the second quarter was an extremely busy one for us as we continued to successfully build and commission over 20 separate upgrading projects. We delivered strong gross margins this quarter. Additionally, our sales team has been active in building relationships with strategic customers interested in placing large orders. We're looking forward to adding additional sales to our backlog through the remainder of 2023. Our plans for becoming cash flow positive and adjusted EBITDA positive in the next nine months also includes bringing in Ian Cain as new president and CEO who will oversee execution of GreenLane's strategic plan. Ian is a proven leader with demonstrated skill in optimizing company growth and financial performance after the startup phase. As I transition into my new role as executive vice chair of the company, I look forward to driving continued growth and success, focusing on key strategic initiatives aiming to unlock the tremendous unpapped potential the company sees in the global R&G industry. Both appointments will take effect later today. The market for R&G continues to offer tremendous growth opportunities for Greenlane's products and services. Not only are we excited about the growing sales opportunities that we see for biogas upgrading equipment, but we believe the expansion of our traditional business model to include a royalty-like structure offering a standardized system will support further sales growth. During the second quarter, the company took control of one of the projects in its deployment of development capital program as a result of unforeseen circumstances and associated delays. Initially, under the convertible note that we issued, We have the opportunity to receive a return on our invested capital and to convert the note into a minority equity interest in that particular RNG project. As a result of this transaction, we have now acquired 100% of this pre-construction project and are advancing the opportunity. Accordingly, the convertible note was cancelled and the company recorded a corresponding impairment in the note in the amount of $1.1 million. Greenlane has also evaluated its deployment of development capital program in the context of the rapidly evolving RNG market and our strategic growth plan. We have determined that funds previously allocated to this program should be reallocated to working capital. This shift better positions us to leverage our product and execution expertise over repeatable, high-volume, high-value opportunities globally. In recent industry developments, In late June, the U.S. Environmental Protection Agency, or EPA, released its final rulemaking for the renewable fuel volumes for 2023 through 2025 under the Renewable Fuel Standard Program. The new rule was published without inclusion of the controversial ERIN program and was positive for RNG. ERINs, as initially proposed, would have offered a substantial new source of revenue for biogas producers in the waste industry, many of which generate electricity and not RNG. EPA's deferral of the eRINs resulted in a 30% jump in D3 RIN prices. It's important to note that according to EPA data, 99.8% of D3 RIN generation for the first half of 2023 was from RNG. Additionally, in the same EPA rulemaking, the issue of co-digestion was fixed. Historically, anaerobic digesters processing food waste and producing RNG were automatically assigned the lower value D5 RIN, while digestion facilities processing manure and other biosolids to generate RNG were allocated the higher value D3 RIN. Through the apportionment mechanism and EPA rule, mixed waste stream digestion facilities that accept food waste, manure, and biosolids will be eligible for D3 RINs. which is a big win for the industry as the separation and processing of food waste is a growing source of feedstock. Furthermore, recently released data demonstrates that the commercial transportation sector has continued to turn to RNG as a driver of its decarbonization strategy. 69% of all U.S. on-road fuel use in natural gas vehicles in calendar 2022 was RNG, surpassing the previous year's record breaking level. RNG used as transportation fuel grew 17% over 2021 volumes and up 218% from 2018 levels. And in California, the entire fleet of vehicles fueled with RNG were carbon negative in 2022 for the third straight year. In closing, I want to thank all of those who have supported GreenLane in building our business as a leading global provider of biogas upgrading systems. and joining us in our mission to help clean up two of the largest and most difficult to decarbonize sectors of the global energy system, the natural gas grid and commercial transportation. I'll now pass the call over to Stephanie.