Greenlane Renewables Inc.

Good afternoon, ladies and gentlemen. Welcome to the Green Lane Renewables Second Quarter 2025 video conference. My name is Aaron Seed, President of Insight Capital Markets, responsible for investor relations at Green Lane. I'm joined today by Brad DeVille, Green Lane's Chief Executive Officer, and Stephanie Mason, Green Lane's Chief Financial Officer. We will begin our prepared remarks followed by a Q&A, which I will moderate. 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 could 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 information and statements except as it 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 with the Canadian security regulators. please feel free to submit any questions you may have to our investor email address at ir.greenlanerenewables.com. Now, over to Brad.

Hello, and thank you everyone for joining us today. I will start off with a brief update of our business progress in the quarter and then turn the call over to Stephanie for a more detailed review of the numbers. Our second quarter results reflect positive progress on all fronts of our 2025 strategic plan, which I set out early this year in my letter to fellow shareholders. That strategy entails development of advanced products, superior project execution, a strong parts and service platform, and royalty revenue, all underpinned by financial discipline with relentless focus on improving adjusted EBITDA results and maintaining healthy cash reserves. This quarter's financial results indicate that overall we are trending in the right direction, but we still have much to accomplish, including launch of our next generation landfill gas upgrading product line and establishment of our own manufacturing. Of particular note this quarter is the royalty contract revenue and its corresponding gross margin contribution. GreenLane reached the second anniversary of its technology licensing agreement with a local partner in Brazil, which triggered revenue recognition of the agreement's one-time minimum volume commitment. As a reminder, GreenLane entered into this technology licensing agreement with the primary aim of accelerating growth of production of biomethane in Brazil, the world's largest sugarcane producing region. This region continues to represent one of the most exciting long-term growth opportunities in our portfolio. With over 400 sugar mills located in agricultural regions far from the Amazon rainforest, the scale of this market is vast and still largely untapped. As with any new market, especially one of this size and complexity, we expect the trajectory to be uneven during the early commercialization phase. However, we believe the long-term potential of sugar mill-based biomethane production in Brazil is significant and we are well positioned to participate meaningfully as the sector scales. Regarding the launch of our next generation landfill gas upgraded product line, we're looking ahead to the upcoming product reveal next month. The new product line will incorporate the contents of our recent patent applications that relate specifically to proprietary system architecture and process enhancements that optimize oxygen and nitrogen removal, two of the most persistent technical barriers to efficient landfill gas upgrading. Our aim is to make RNG projects more accessible and scalable by enabling project owners to enhance revenue generating RNG output from their assets while minimizing upfront investment. Quoting customers and working through the sales cycle to secure orders will follow the product reveal next month. Revenue recognition from new orders is likely to begin in 2026. We believe that the launch of this product line will enable renewed growth, driving long-term value and reinforce our leadership in distributed, dispatchable and decarbonized energy production solutions. As noted in our release on the market outlook, The R&G industry is gaining momentum across markets, applications, and policy frameworks. U.S. production potential is up 17% since 2019, enough to supply every household currently using natural gas and cut over 300 million metric tons of CO2 annually, while the IEA, that's the International Energy Agency, projects global capacity could grow 20-fold to meet 25% of natural gas demand. This growth is supported by major policy advances. The recent passage of the One Big Beautiful Bill Act in the US preserves a key incentive to support clean fuel production, which will help provide a degree of certainty for RNG project developers to plan, invest, and grow. Demand is also expanding into new sectors from AI data centers leveraging RNG's 24-7 low-carbon attributes to transportation, where Volvo reports a 25% rise in natural gas truck sales, and utilities like Fortis PC increasing residential blends, making it more mainstream than before. Internationally, Brazil saw a 73.5% surge in biomethane output in late 2024, with new plants in Sao Paulo and Rio de Janeiro lifting production to over 526,000 cubic meters a day and additional facilities under construction expected to add 800,000 cubic meters a day by 2026 under the new blending mandates. I want to thank all those who have continued to support GreenLane as our business continues to evolve and even improve, as you've seen today. I appreciate your patience as you've watched us turn around our financial performance and have now set the stage for some excitement in the weeks ahead as part of our landfill product reveal. I'll now pass the call over to Stephanie.

Thanks, Brad, and good afternoon, everyone. As a reminder, all figures are in Canadian dollars unless otherwise stated, and all comparisons are for the second quarter of 2025 against the second quarter of 2024. Our second quarter performance demonstrates clear progress in strengthening the financial foundation of our business. We delivered $15.1 million in revenue, up 3% from Q2 2024, and generated $3.4 million in adjusted EBITDA, or 23% of revenue, along with $1.4 million in net income and comprehensive income, or 9% of revenue. This compares with losses of $0.8 million and $0.4 million respectively in Q2 2024, representing a significant year-over-year improvement. Our gross margin before amortization was 49%, which includes the impact of the royalty revenue of $3.3 million received under the Technology Licensing Agreement's one-time minimum volume provision. As noted in our Q1 reporting, this amount was previously included in deferred revenue and has accrued corresponding gross margin excluding amortization of 2.9 million. Excluding this royalty amount, our underlying gross margin was 38% up meaningfully from 28% in the same period last year. And our adjusted EBITDA was 0.5 million or 5% of revenue. This improvement reflects the shift toward more profitable areas of the business and cost control consistent with our strategic focus. We've been diligent in maintaining strong cost discipline on a year-to-date basis. G&A expenses are down 28% year-over-year, and we've delivered $2.3 million in adjusted EBITDA, representing 11% of sales, further evidence of our ability to translate revenue growth into profitability. Green Lane sales order backlog increased significantly, ending the quarter at $26.3 million, up 24% from Q1 2025, reflecting strong order intake momentum. We've maintained a healthy cash position at $16.6 million, which has remained consistent over the last three quarters. We're still reporting no debt other than payables, advanced payment and performance bonding, and standby letters of credit resulting from normal course operations. We're converting backlog into profitable revenue, growing sales in our most profitable segments, and driving long-term value for our shareholders. We're delivering in our disciplined approach and believe GreenLane is well-positioned to launch its next generation landfill grass upgrading product line, including manufacturing, and deliver long-term value and capitalize on growing market opportunities. We look forward to keeping you appraised on our progress with that. Let's go over to Darren for the Q&A.

Thank you, Stephanie. Today's EBITDA, today's adjusted EBITDA of 3.4 million is a great result. How should investors think about Greenlane's adjusted EBITDA going forward?

Thanks for that question, Darren. I'm going to start by saying that we don't provide guidance on our future results, but I will say the main driver in this quarter is the 2.9 million gross margin contribution from the royalty contract. So as we've stated, this 2.9 million was related to the one-time event under the contract that we met on the two-year anniversary. So as Brad already mentioned, This royalty contract is mainly aimed at the sugarcane industry, which is relatively new, and the growth is expected to be uneven. So when you look at our historical results, you can see that unevenness. So we had our first royalty recognition in Q1 of 2024, and then didn't see anything again until Q2 of 2025.

Thank you, Stephanie. I understand that Green Lane is revealing its next generation landfill gas upgrading product this fall. To the investment community, Steve's product reveal has a potential positive impact on GreenLake.

Well, the reveal is just the start, right? And in fact, the start was the product development activities that are underway now. So following the product reveal, we'll get into quoting and ultimately securing orders, which we expect to start to see revenue to flow into 2026 timeframe. I think it's important that investors should look at this as really speaking to the second of three strategic initiatives that I rolled out in my letter to shareholders at the start of this year, which was to improve the profitability of our core upgrading business. So we are looking for this product to create a renewed growth trajectory for us so that we can continue to drive value in the business. And we're really excited about the product launch.

Thanks, Brad. You mentioned the establishment of Green Lanes Manufacturing. Can you tell me about that?

Yeah, so it's important to to break it down, I think, three bits. So the historically for the upgrading portion of our business, we did rely on a model of global sourcing of components and then partnering with trusted fabricating partners. So essentially an outsourced model for the upgrading business. Our biogas to sulfurization is a different model. So that's where we have in-house manufacturing assembly in our facility in Vicenza, Italy. With our next generation landfill gas product line, we are expecting to build locally in Brazil, as well as a local manufacturing facility that'll be new in North America. So one to satisfy the Brazilian market, one to satisfy the North American market. We all know what's going on with tariffs. That's an important thing. But beyond that, to enable our customers to access low cost financing for their projects, it's important to have local production made locally product. So we'll be following the same model as we currently have today with our biogas desulfurization in-house manufacturing.

And lastly, Brad, you still seem pretty positive about the Brazilian market and its future opportunity set. What are some key business drivers here?

So a great report came out just within the last couple of months from the International Energy Agency. And in their report, they mapped out a couple of different scenarios of growth in biomethane. This report was focused solely on biogases and biomethane, and it drives out to a period of 2035 and 2050. 2050 is a bit out there. So let's focus on 2035. It's only 10 years away now. Within that time horizon, the IEA predicts biomethane growth in Brazil to be 7x, which, you know, that corresponds to something north of 20% CAGR over that 10 year horizon. So that's really tremendous growth. It's hard to find any market or industry that's growing at that clip. That's really driven by two main things or two main sectors, I should say. So one is the landfill gas sector, which is where we're currently deploying projects, working with clients. Stephanie has already commented. I've commented. on the the sugarcane opportunity between the two of those there's two main things today the near-term opportunity is landfill it will continue to be a great opportunity for us over the coming years the sugarcane opportunity it's a huge opportunity could dwarf eventually landfill but it's going to take quite some time to develop so those are really the key drivers um Brazil is really at the initial stages of getting into biomethane, so it's really a very bright future. I should also add that in Brazil, they don't rely on the same kind of value for the resulting biomethane or RNG that we see in North America or in Europe today. And we just have to look to the success in Brazil of the ethanol industry, how that competes without subsidy, with gasoline, the volumes going into transportation of ethanol are about the same as gasoline. It's that whole mindset and economic structure that really is the enabling piece for RNG in the country. So super excited. I think there's a lot of enthusiasm in the country right now. We're benefiting from that. We're trying to provide solutions to customers as quickly as we can and satisfy that thirst to meet and to continue our market leadership in the country.

Great. Well, thank you very much, everyone, for watching today's financial report. And we look forward to seeing you next quarter.