Xebec Adsorption Inc. (TSX: XBC) ("Xebec"), a
global provider of clean energy solutions, announced today its
2020 fourth quarter and full year results, with the following
highlights:
-
Revenues increased by $7.2 million to $56.5
million for the twelve-month period ended December 31, 2020,
compared to $49.3 million for the same period the prior year.
- Adjusted EBITDA of
($22.0) million for the twelve-month period ended December 31,
2020, compared to $7.0 million for the same period last year.
-
Net loss of $32.0 million or ($0.33) per share
compared to $2.0 million or $0.03 per share in the twelve-month
period ended December 31, 2020 compared to the same period in the
prior year.
-
Working capital increased to $171.2 million on
December 31, 2020, for a current ratio of 4.1:1, from working
capital of $37.3 million and a current ratio of 3.2:1 on December
31, 2019.
-
Management guidance for fiscal 2021 of
consolidated revenues in the range of $110.0 to $130.0 million and
an adjusted EBITDA margin in the range of 3.0% to 4.0%.
-
As at December 31, 2020, the company had $168.6 million of cash
compared to $22.7 million as at December 31, 2019.
Financial Highlights:
|
Three months ended December
31, |
% of Change |
Twelve months ended December
30, |
% of Change |
|
2020 |
2019 |
|
2020 |
2019 |
|
(In millions of dollars) |
(audited) |
(audited) |
|
(audited) |
(audited) |
|
Revenues |
6.4 |
13.6 |
-53% |
56.5 |
49.3 |
15% |
Gross margin |
(11.4) |
4.1 |
N/A |
0.3 |
15.5 |
(98%) |
Gross margin as a percentage of revenues |
(178%) |
30% |
|
0.5% |
31% |
|
Adjusted EBITDA (1) |
(22.6) |
2.1 |
|
(22.0) |
7.0 |
|
Net income (loss) |
(28.3) |
(0.5) |
|
(32.0) |
2.0 |
|
Net income (loss) per share - basic ($/share) |
(0.33) |
(0.01) |
|
(0.33) |
0.03 |
|
Weighted average number of shares |
106,774,312 |
72,547,423 |
|
96,492,983 |
64,319,442 |
|
As at: |
|
|
|
December 31, 2020 |
December 31, 2019 |
|
Total assets |
|
|
|
444.7 |
66.3 |
|
Total liabilities |
|
|
|
100.7 |
27.4 |
|
Equity |
|
|
|
344.0 |
39.0 |
|
As at: |
|
|
|
March 18, 2021 |
April 14, 2020 |
|
Backlog |
|
|
|
100.1 |
99.3 |
|
(1) 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 decreased by $7.2 million to $6.4 million
for the three-month period ended December 31, 2020, compared to
$13.6 million for the same period the prior year. The decrease is
mainly due to revenue adjustments in the last quarter due to
extraordinary items in the Cleantech Systems business segment
resulting from the impact of the COVID-19 pandemic and other
operational issues, which substantially increased product,
operational and installation costs. With the impact of COVID-19
lasting longer than expected and additional restrictions being
re-imposed by local authorities in Q4/20, Xebec undertook a
detailed accounting review of its long-term, production-type
contracts for its renewable natural gas projects where revenues are
recognized based on the percentage of completion method. As a
result of the projected total cost of fulfilling these contracts
having increased substantially, Xebec determined that previously
incurred expenses represent a lower percentage of total costs than
previously estimated. As such, revenues recognized to date had to
be adjusted ($5.2 million) to reflect the revised percentage of
completion for contracts under Xebec’s updated estimates.
Furthermore, Xebec reversed revenues ($1.9 million) previously
recognized based on the percentage of completion method due to the
deteriorating financial position of a client where the likelihood
of payment became uncertain in early 2021. Finally, two contracts
that had become unprofitable were cancelled by a customer in early
2021 as a result of the delivery delays, due to COVID-19 and other
related disruptions. This impact led to a $5.4 million revenue
adjustment. The parts and materials used for these contracts have
since been inventoried and are expected to be used for future
contracts.
-
Gross margin decreased from $4.1 million to
($11.4) million for the three-month period ended December 31, 2020
compared to the same period the prior year. The gross margin %
decrease from 30% to (178%) is mainly due to the reversal of
revenues described earlier and some of the contracts previously
estimated to be profitable now projected to result in losses. The
percentage of completion method requires that losses on such
contracts be recognized immediately, further impacting the
Company’s gross margin. Moreover, the impact of COVID-19 increased
costs for projects in Italy and China, which also resulted in a
gross margin deterioration.
-
Selling and administrative expenses (“SG&A”)
for the three-month period ended December 31, 2020, of $13.6
million were higher by $10.0 million compared to $3.6 million for
the same three months of 2019. This is primarily due to several
expenses that are non-recurring in nature that have been accounted
for in the fourth quarter of 2020: (1) $4.8 million of transaction
costs for the HyGear and Inmatec acquisitions; and (2) a $1.1
million provision for bad debt relating to uncollectible accounts
receivable and a penalty for a biogas project in Europe.
Additionally, $0.7 million of recurring administrative expenses
resulted from the acquisitions of Titus and ACS. Finally, overall
SG&A expenses increased due to an organizational scale up of
employees and associated costs to support the increased level of
sales, and from grants of restricted and deferred share units made
to key employees.
-
Net loss of $28.3 million or ($0.26) per share in
the three-month period ended December 31, 2020 compared to a net
loss of $0.5 million or ($0.01) per share for the same period the
prior year.
-
Adjusted EBITDA decreased to ($22.6) million for
the three-month period ended December 31, 2020, from $2.1 million
for the same period last year.
-
Backlog increased by $0.8 million over the last 12
months, from $99.3 million on April 14, 2020 to $100.1 million on
March 18, 2021.
Recent Events
- On March 16, 2021, Xebec commented
on class action lawsuit application filed in Québec
- On March 15, 2021, Xebec partnered
with Coregas, one of Australia’s largest gas companies, to
accelerate the development of hydrogen ecosystems in Australia and
New Zealand
- On February 24, 2021, Xebec secured
$59.3 million in new credit facilities from National Bank of
Canada
- On February 22, 2021, Xebec
completed its acquisition of Inmatec
- On February 16, 2021, Xebec
launched UK hydrogen supply strategy with 15-year Gas-as-a-Service
contract and construction of first Hydrogen Decentralized
Production Hub in the country
- On February 11, 2021, Xebec
received an order for FuelCell Energy’s Port of Long Beach Project
with Toyota
- On January 7, 2021, Xebec graduated
to the TSX and started trading on the exchange
- On December 31, 2020, Xebec
completed its transformative acquisition of HyGear, a leading
provider of local hydrogen through steam methane reforming and
electrolysis
- On December 30, 2020, Xebec closed
its $143.8 million bought deal public offering and $63.3 million
concurrent private placement with CDPQ
- On December 17, 2020, Xebec entered
the hydrogen and renewable natural gas markets in Germany with the
acquisition of Inmatec, a world leader in on-site oxygen and
nitrogen generation products
- On December 8, 2020, Xebec launched
its hydrogen strategy with the transformative acquisition of
HyGear
- On November 12, 2020, Xebec
strengthened its partnership with Shenergy in China with a
strategic investment
CEO Quote:
“Despite positive developments in certain
segments and acquisitions that we believe position us well for the
future, 2020 was a challenging year for Xebec’s financial results
as a result of different factors, including the negative impact of
COVID-19.
Going forward, several changes have been put in
place to ensure that the issues we encountered in 2020 do not
reoccur. These changes include adjusting our quote templates to
better account for risks associated with installation activities,
launching our standard containerized biogas upgrading system called
BGX Biostream™, which offers more predictable production and
installation costs, and changes to our project management practice
to better anticipate future cost increases. Furthermore, as a
result of its graduation from the TSX Venture to the main TSX
exchange in January 2021, Xebec has been working with external
consultants to implement internal controls at the level required
for non-venture issuers in the required transition timeframe, to
enhance our systems and process to better support our growth
globally.
In 2020, we also expanded our management and
operational capabilities, which allowed us to launch on several
internal improvement projects such as upgrading our ERP system,
provide support in publishing our first ESG report, support the
establishment of our internal M&A team and provide assistance
and training for internal controls.
Although the year did not evolve as initially
planned as we faced headwinds, including COVID-19, I am excited
about the road ahead as the company is in a strong financial
position and the market opportunities for us continue to expand.
For example, our new Biostream product is targeted at small to
mid-sized renewable natural gas projects, and the standardization
of our design will allow us to scale manufacturing in line with
demand. Coupled with more favourable renewable energy policies in
North America, we believe that we are at the start of a broader
renewable gas infrastructure build-out. The addition of HyGear and
Inmatec to our operations also positions us favourably to benefit
from the hydrogen and onsite generation trends. Overall, in 2021 we
expect to continue to build on strong revenue growth and plan a
return to positive adjusted EBITDA,” stated Kurt Sorschak,
Chairman, President and CEO of Xebec Adsorption Inc.
Current Market Outlook
The political and regulatory backdrop for
Xebec’s products and services remains positive, and both Europe and
North America are moving aggressively towards net-zero positions by
2050. In the United States, the new Administration reaffirmed is
leadership as it relates to climate change and rejoined the Paris
Agreement in January. Consequently, the EPA has reviewed its past
practices under the Renewable Fuel Standard (RFS) and RINs
(renewable identification numbers or low carbon fuel credits) have
significantly increased in value from its three-year low in 2019
and is approaching its all-time-high from 2017. The increase in
value of these credits is one factor that drives renewable gas
project development.
Despite challenges faced by the COVID-19
pandemic and related operational issues, Xebec believes that the
outlook for 2021 and beyond continues to be very positive. Xebec
anticipates strong revenue growth and a return to positive adjusted
EBITDA in 2021.
Cleantech Systems
Renewable Natural GasXebec is
accelerating its shift towards standardized biogas upgrading
products for the renewable natural gas market. The company launched
and delivered its first fully containerized and standardized BGX
Biostream™ (“Biostream”) unit for small-scale biogas upgrading
applications in 2020. Xebec expects that this new product will lead
to predictable cost management and improved gross margins. In
addition, Biostream will allow Xebec to scale its operations to
fill the growing demand for RNG systems. The product’s value
proposition offers customers significantly shorter lead times, one
week installation and start-up periods, a modular and scalable
design, and the ability to handle smaller, fluctuating biogas flow
rates.
According to the American Biogas Council, it is
estimated that 8,574 dairy, poultry, and swine farms and 3,878
water resource recovery facilities, are primed for biogas and
renewable natural gas production. Biostream is estimated to cover
approximately 80% of these use cases with its two standardized
configurations. In addition, oil majors such as BP, Shell and
Chevron, who are potential partners or customers, have become
increasingly engaged in the market and have started to directly
fund RNG developments.
Overall, the company continues to see a positive
backdrop for the RNG industry as organizations and governments
around the world aim to manage organic waste more effectively and
decarbonize the energy supply, transportation and industry.
Xebec regards renewable natural gas quote
activity as an early indicator of future order activity. The
company’s quote log remains strong at over $1 billion quotes
outstanding, of which $439.6 million (as of March 24, 2021) are
actively being pursued. Biostream quotes have increased
significantly over the last several months, as a result of new
marketing and sales efforts, and now make up 23.8% of total quotes.
The company is in final negotiations for several projects, leading
to the expectation of positive short-term order outlook and an
increased backlog.
The company expects that the renewable natural
gas segment will comprise approximately 20% to 30% of total
revenues in 2021.
HydrogenThe hydrogen economy is
rapidly growing and presents a large-scale market worldwide.
Xebec’s hydrogen purification business coincides with the market’s
expanding opportunities as the need for high-purity hydrogen for
use in fuel cell electric vehicles increases.
On February 11, 2021, Xebec announced a contract
for Fuel Cell Energy’s Port of Long Beach project with Toyota. This
recent order, among others, showcases the growing interest in
Xebec’s proprietary PSA technology for such applications.
As a result of Xebec’s acquisition of HyGear in
December 2020, the company obtained a world leading hydrogen
generation business with both steam methane reforming and
electrolysis technologies. HyGear is expected to start contributing
revenues and profits to Xebec in 2021 through a combination of
equipment sales, long-term Gas-as-a-Service contracts and R&D
projects.
The cornerstone of HyGear’s strategy is to
satisfy the existing and evolving needs for industrial hydrogen,
while also facilitating the upcoming demand for fuel cell electric
vehicles (FCEVs). This is supported by both on-site hydrogen
generation equipment and local decentralized hydrogen production
hubs in strategic areas. Customers can either purchase equipment or
sign long-term, 15-year Gas-as-a-Service contracts and pay for the
molecule itself.
On February 16, 2021, Xebec announced the
construction of the company’s second Decentralized Hydrogen
Production Hub in West Bromwich, United Kingdom with Buse Gases Ltd
as a joint venture. This hub is in addition to the one currently
operational in Arnhem, The Netherlands, which was commissioned in
2017 and is delivering hydrogen to customers locally.
Decentralized Production Hubs will be a key
aspect of Xebec’s hydrogen supply strategy going forward and the
full details will be provided in a corporate update later this
year.
Industrial Service &
SupportXebec continues its roll-up strategy by acquiring
compressed air service companies to build out the company’s
Cleantech Service Network throughout North America. With the
strategic acquisitions of HyGear and Inmatec, the Cleantech Service
Network coverage will now include Europe.
When customers select a vendor for a
multi-million-dollar renewable natural gas or hydrogen system, the
ability to provide local service and support figures prominently in
their purchasing decision. The company continues to aggressively
expand its Cleantech Service Network across its operating regions.
As a result, Xebec is targeting approximately 30 companies (5
completed to date) by 2025, resulting in a yearly revenue run rate
of about $250 million by 2025.
This strategy supports Xebec’s long-term plan to
transition to a more services-based company. Increased exposure to
service revenues is expected to improve the company’s overall
revenue predictability and profitability. Lastly, the company’s
service offering is not limited to its own equipment as technicians
can interface with other vendors’ renewable natural gas and
hydrogen systems.
Renewable Gas
InfrastructureXebec is addressing the renewable gas
infrastructure opportunity through GNR Quebec Capital L.P.
(“GNRQC”), a fund created in partnership with The Fonds de
solidarité FTQ (“Fonds”), the largest capital development fund in
Québec. As a result, all of Xebec’s renewable gas infrastructure
investment activities were folded into GNRQC. Xebec is an equal
equity investor alongside the Fonds and will participate in the
sale of renewable natural gas equipment alongside long-term service
contracts for the equipment. GNRQC is dedicated to
developing high-performance organic waste treatment facilities for
the production and distribution of renewable natural gas (RNG) in
Québec. When fully capitalized with $100 million in equity and
appropriately leveraged, GNRQC expects to finance approximately 12
to 15 renewable natural gas projects in the province over the next
decade.
RNG production is supported by both the Québec
government through targets and incentives and private corporations
who are seeking ESG friendly solutions to reduce their carbon
footprints. In the “2030 Plan for a Green Economy” announced on
November 16, 2020, the Québec government’s budget included $213
million for the PSPGNR program (MERN), which will provide financial
support for agricultural projects. Québec is also maintaining its
target to increase bioenergy production by 50% and has a target of
10% RNG in the pipeline by 2030. This follows the government’s
announcement on July 7, 2020 for its organic material management
plan which set a target to recycle or recover 100% of organic waste
in the province by 2030.
GRNQC started its operations in Q3 2020 and now
employs a team comprising waste management, business development
and project finance expertise. The fund has more than 20 projects
under evaluation of both greenfield and brownfield varieties in
agriculture, municipal and industrial waste applications. GRNQC
expects to complete several investments in 2021 as projects
progress over their average three-to-four-year development
cycle.
Xebec does not expect to realize any investment
income or losses for renewable gas infrastructure in 2021.
Management Guidance for 2021For
fiscal full-year 2021, Xebec expects to continue its revenue growth
and a return to positive adjusted EBITDA. Given the current order
backlog of $100.1 million (as of March 18, 2021), including
projected revenues of HyGear, Inmatec and the Cleantech Service
Network, we expect consolidated revenues for 2021 in the range of
$110.0 to $130.0 million and adjusted EBITDA margins in the range
of 3.0% to 4.0%.
Xebec to Host Live Investor Webinar to
Discuss Q4 and Year End 2020 ResultsAn investor webinar
for shareholders, analysts, investors, media representatives, and
other stakeholders will be held today, March 25, 2021 at 8:30AM EST
(5:30AM PST).
Register here:
https://app.livestorm.co/xebec-adsorption-inc/2020-q4-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 xebecinc.com/investors.
2020 Fourth Quarter and Year End
Financial Statements and Management’s Discussion and
AnalysisThe complete financial statements, notes to
financial statements, and Management’s Discussion and Analysis for
the twelve-month period ended December 31, 2020, are available on
the company’s website at xebecinc.com/investors or on the SEDAR
website at www.sedar.com.
Related
links:https://xebecinc.com/https://xebecinc.com/bgx-biostream/bgx-biostream-overview/
For more information:Xebec
Adsorption Inc.Brandon Chow, Director, Investor Relations+1
450.979.8700 ext 5762bchow@xebecinc.com
About Xebec Adsorption Inc.
Xebec is a global provider of clean energy solutions for renewable
and low carbon gases used in energy, mobility and industry
applications. The company specializes in deploying a portfolio of
proprietary technologies for the distributed production of
hydrogen, renewable natural gas, oxygen and nitrogen. By focusing
on environmentally responsible gas generation, Xebec has helped
thousands of customers around the world reduce their carbon
footprints and operating costs. Headquartered in Québec, Canada,
Xebec has a worldwide presence with five manufacturing facilities,
eight Cleantech Service Centers and four sales offices spanning
over four continents. Xebec trades on the Toronto Stock Exchange
under the symbol (TSX: XBC). For more
information, xebecinc.com.
Cautionary Statement 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.
Non-IFRS MeasuresThis press
release refers to financial measures that are not recognized under
International Financial Reporting Standard (“IFRS”). A non-IFRS
financial measure is a numerical indicator of a company's
performance, financial position or cash flow that excludes or
includes amounts, or is subject to adjustments that have the effect
of excluding or including amounts that are included or excluded in
most directly comparable measures calculated and presented in
accordance with IFRS. Non-IFRS measures do not have any
standardized meaning under IFRS and therefore are unlikely to be
comparable to similar measures presented by other companies having
the same or similar businesses.
The Corporation believes these measures are
useful supplemental information. The following non-IFRS measures
are used by the Corporation in this press release: EBITDA, EBITDA
margin, Adjusted EBITDA, Adjusted EBITDA margin, backlog, quote log
of Xebec.
Please find below definitions of non-IFRS
financial measures used by herein:
“EBITDA” means the earnings before interest,
income taxes, depreciation and amortization, where interest is
defined as net finance costs as per the consolidated statement of
comprehensive income.
“EBITDA margin” being EBITDA as a percentage of
revenues.
“Adjusted EBITDA” means starting with EBITDA and
adjust 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.
“Adjusted EBITDA margin” being Adjusted EBITDA
as a percentage of revenues.
“Backlog” means contracts that have been
received and considered as firm orders.
“Quote log” means sales quotes that have been
provided and are being pursued by business development and sales
representatives of Xebec.
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