Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the SolarBank Fiscal First Quarter 2025 Financial Results and Corporate Update Conference Call. My name is Jules Abraham with CORE IR, the company's investor relations firm. At this time, all participants are in a listen-only mode, and after today's presentation, there will be a question-and-answer session which will feature previously received questions. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will also be available approximately one hour after the end of the call and accessible on the investor relations portion of the company's website with access for 30 days.
Earlier today, the company released its financial results for the fiscal first quarter ended September 30th, 2024, and a copy of that press release will be found on the company's website at solarbankcorp.com under the Investors tab. Joining me today on the call from SolarBank Management are Dr. Richard Liu, Chief Executive Officer, and Sam Sun, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address SolarBank's expectations for future performance or operational results, and forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in SolarBank's Annual Information Form, most recently filed annual report on Form 40-F, and subsequent periodic reports filed with the SEC, SEDAR+, and SolarBank's press release that accompanies this call, and particularly the cautionary statements within.
The content of this call contains time-sensitive information that is accurate only as of today, November 14th, 2024. Except as required by law, SolarBank disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It's now my great pleasure to turn the call over to SolarBank CEO, Dr. Richard Liu. Richard.
Thank you, Jules, and thank you everyone for attending this earnings call. I'm very honored to be here updating our dear investors and interested parties about what a wonderful quarter that SolarBank has just achieved. I think, you know, from my perspective, we are glad to be presenting our first fiscal quarter 2025 result today, just a few weeks after we reported our fiscal 2024 annual report, which was a significant year of achievement for SolarBank at the corporate and organizational level, as well as in the operating and the financial results. I'd like to reiterate that for the full year 2024, which ended June 30th, 2024, we had our successful debut onto the Nasdaq Global Market, reported the triple of our revenues from the previous fiscal year, and inflected a positive adjusted EBITDA.
As we communicated in the prior call, we anticipated the new fiscal year 2025 would get off to a good start, and it has. If you have been following us, I'm sure you have noticed a steady flow of news announcing new signed projects and installations, and we are excited to be maintaining our growth trajectory. I'd like to highlight some of that progress for you here prior to turning the call over to our CFO, Sam Sun. Our Q1 financials indicated a more than a double in our revenue to CAD 16 million, which we break out in three different categories. The one that perhaps we are most excited about is the independent power producer production, which was CAD 4 million. We never had such a high recurring revenue. Now we do, up from zero in the prior period.
This revenue represents a recurring asset-based revenue from zero-emitting electricity power plants supplied to our customers, such as the electricity system operators and the municipality governments under the power purchase agreement. It's a number that we anticipated will grow over time as we add to the asset base, producing and selling more zero-carbon electricity from the solar power plants and the EV charge and the battery storage systems that we develop, build, operate, and own, so the revenues from IPP was basically zero a year ago, now has grown to $4 million for this quarter, and again, we believe this will grow over time in lockstep with solar power plants we build that we choose to own upon completion.
The second part, in addition to the independent power producer revenue, was the engineering, procurement, and the construction services revenue also grew over 100% for the quarter, and led by continued work on the Honeywell settlement basins projects, and also the development fee were down. As I mentioned, we have four revenue streams. We have a development revenue. We have engineering, procurement, construction revenue. We have operation maintenance revenue. We have IPP revenue, right? While reporting a significant growth in the IPP business of $4 million of EPC revenue growth of $16 million, our development revenue was down, and this is due to the main development fees from the projects are periodically as we achieve NTP and as we close project sales, so it's a timing factor.
On a geographic basis, we recognized approximately 42% of our revenues for the quarter or CAD 7 million from Canada, up from just CAD 336,000 in the previous year's period. We generated CAD 9 million in operating cash flow for the quarter compared to CAD 675,000 in last year's same period. I'd like to also highlight some of the announcements, events, and milestones in the quarter that support the conviction that we are well positioned for growth, including markets installations that we continue to support, as well as some new projects about which we are particularly excited about moving forward. Our $41 million US dollar project that represents 21 megawatts under construction for Honeywell continued advance with expected completion in the fourth quarter of 2025. Major mechanical completion finished is in the final stage of interconnection now.
The 7 megawatts Geddes community solar project in Upstate New York, again, that's a key addition to our own independent power producer portfolio that have achieved the debt financing and expected to be operational in the third quarter fiscal year 2025, again, in the final stage of detailed interconnection. In Alberta, in Canada, the 1.4 megawatts Township project, which is a large rooftop in Alberta, near Calgary Airport, under construction for Fiera Real Estate, which manages about CAD 7.4 billion. That's how big Fiera is. We're happy to have such a forward-looking real estate company to engage us to help them to decarbonize their buildings. That project is expected to be operational before the end of the current calendar year. This project is expected to be the first of the many that we are building for them.
Our main business, income-wise, is still the community solar portfolio we have in New York. And we also started making headway in the first community solar program in Canada, which is in the province of Nova Scotia, that we will continue to report as we progress further. You know, it was to mention when the SolarBank completed our IPO in March 2023, one of the primary goals was to grow the independent power producer business. This quarter marked a major milestone with the closing of the Solar Flow-Through acquisition, which has resulted in a significant increase in SolarBank's IPP asset and the recurring revenues. I'm expecting another exciting year of growth for SolarBank. I fully agree with Elon Musk's statement on November 12th.
He said solar power will be the vast majority of the power generation in the future, as you know, that there's no fuel cost, there's no carbon cost, and very low maintenance, and we can depend on why all we need all the energy source to power not only our existing infrastructure, but new digital economics in the coming years. And that's where we are headed to. We remain very excited about our progress to date, and I believe that strong demand for the non-emitting energy we are providing, a great team, and a unique end-to-end offering will continue to drive our business as we head further down the path towards higher sales, increased EBITDA, and ultimately profitability. So having said so, I'm sure our CFO has more details to share with you.
So now I'd like to turn the call over to Sam, who will review our financial results in more detail. Sam, if you could, please.
Sure. Thanks, Richard. First of all, please note that all the figures are in Canadian dollars here. Our total revenue for this quarter was CAD 16 million versus approximately CAD 7.7 million in the prior year's period, an increase of 108%. The high revenue was due to a CAD 6.3 million increase in EPC services revenue and over CAD 4 million in IPP business, which compared with around CAD 15,000 the prior year, partially offset by the lower revenue from different fees. Gross margin for the quarter was approximately 28.4% compared to the 30.6% in last year's same quarter. Gross margin was lower as a result of the larger percentage of the revenue coming from the EPC services revenue, which generally has a lower margin than the IPP and other revenue lines. As a percentage of the sales, our operating expenses were approximately 22.7% for this quarter compared to 23% in the prior year's quarter.
We're targeting to continue to decrease in operating expenses as a percentage of sales as we scale and continue to maintain a careful eye over our operating costs. As noted in the press release that we issued today, the Adjusted EBITDA increased to approximately $2.4 million as compared to the $0.6 million in the first quarter of last year. Net income for the quarter was approximately $0.2 million or 1 cent per basic share compared with a gain of $2 million or eight cents per basic shares in the last fiscal year first quarter. The company ended with $32.8 million in current assets, an increase of $17.6 million compared to the end of fiscal 2024. The increase is mainly due to an increase in cash, receivables on revenue, and inventory.
Current liabilities increased from CAD 22.6 million to CAD 36 million as of September 30, 2024, mainly due to an increase in payables and the current portion of long-term debt, which is almost entirely non-recourse project-level debt assumed as part of the Solar Flow-Through Funds acquisition. Long-term debt as of September 30, 2024, was CAD 15.7 million, an increase of approximately CAD 46.4 million from last year's end. Our debt consists of primarily the project debt, which is non-recourse, and our projection out in 2025 indicates that the current level of debt is certainly manageable relative to Adjusted EBITDA and the other key balance sheet metrics that we are monitoring very closely. Our cash and short-term investment was approximately CAD 15.8 million as of September 30, 2024, compared with CAD 6.2 million at the end of last fiscal year.
A portion of this cash position is required to be maintained pursuant to the terms of the credit agreement assumed as part of the Solar Flow-Through. We continue to believe we can execute our strategic goals for the remainder of 2025 and beyond, which includes continued growth of the IPP portfolio and execution on the demand pipeline. That concludes my remarks, and I would like to turn the call back to Richard for any remaining comments. Thank you.
Thank you, Sam. You know, I think certainly lots of members. And for the investors and people on the call, we filed with the exchange already. So please have a read, and then we will have all the details in that file. So before opening up the call to questions and answers, I'd like to make some remarks about our company's thoughts about the election in the U.S., the long-term demand picture for solar energy and renewable energy in general, and I'll offer some additional insights as to our financial model to share with you. It is our view that the demand for electricity is expected to grow significantly. You know, just taking Ontario, for example, the Independent Electricity System Operator study indicates that they would double the demand every 10 to 12 years for the next 25 years.
We will need, you know, all the supply, renewables or not, to meet the demand, especially in a timed manner. Those demands mainly come from the digital economy, given it being a data center, AI training facility, even crypto mining. As you can see, crypto achieved a historical high just immediately after the election. The power demand is going to be huge, right? As I mentioned, you know, we will need all the power there is to support the continuous growth of our economy, digital or non-digital, right? Because of this, you know, how do you deliver those power in a timely manner? We all know large-scale projects take time. Nuclear power takes time. Even if it's a small modular reactor, it still will take a long time to commission, right?
And also, you have an existing infrastructure, the gas plants, the coal-fired plants, all those things have been in operation for more than 40-50 years, and there's an upgrade requirement. Upgrade not only comes slow, but also will come with a rate increase, which the society may or may not be happy with, right? And on top of that, you know, the distribution system, transmission system, that you can see how long it will take, right? So we need all the forms of energy that we certainly need to work with existing infrastructure in a timely manner so to continue to power the growth, right? So with all the reasons I mentioned that, you know, I will say the electricity price that will gradually edge up, increase, right?
If you look at your bill and we look at our solar, the community solar revenue report, and it already happened in, you know, Upstate New York, you know, with our projects, we used to have a VDER rate of 10.9 cents. Now the VDER rate is already 12.13 cents, right? So that's the kind of things that we will say while the cost of solar energy production will continue to drop, right? And it is a meaningful and reasonable supply that will continue to be here in addition to passing the grid parity. So that's about the demand and the supply in a timely manner. I know lots of people are interested and anxious to see what the Inflation Reduction Act twist will be, what the ITC PTC will be.
It is our view that, you know, if you look at the investment, there have been a lot of investment, not only, you know, in the blue states, but significantly in the red states, which is four times more benefits or incentives that have happened in the blue states, right? Because you think about all the major constructions, all the major manufacturing facilities, and so on and so forth, they are happening in the middle of the country, not on the coastline, whether it's east coast or west coast, right? So yes, that as we build in the American grid again, we will internalize, we'll bring back a lot of construction jobs, and those construction jobs, manufacturing jobs will produce product, continue to supply us because we are product brand agnostic.
We always buy from the market that is bankable, available at lower cost so that we can deliver more value to the end consumers, right? As long as that is going on, whether it's ITC or PTC, we'll continue to aid the development of the potential incentive, you know, to the renewable energies and maybe including some non-renewables. But overall, that the Inflation Reduction Act dollars will be used to continue to support, right, the supply and demand of energy to support the world, right? Let me give you my last thought on this one: that, as you know, the electricity business is a state-level or provincial-level responsibility, right?
As the states move forward with their own energy policies, there are certain states, especially the 22 community solar states, you know, northwest corner of the country or west coast. They will continue to move forward with existing policy because, as you know, policy takes time. You know, from our perspective, our competency is really development, is really executing the existing pipeline. We will move forward as we have planned. You know, just a little bit, you know, as you know, we announced last week that we are moving into the digital economy by data centers and so forth, that to match our large-scale projects to supply directly to the digital economy. Finally, I'd like to discuss PowerBank's unique two-tiered revenue model, which we believe is exceptional for our shareholders.
Not only does the model entail generating cash from each of our four lines of business, but one of those lines, namely the independent power producer business, representing fully recurring revenue, which grows as we finance and buy some of the power plants that we built, right? Those are a choice that we make case by case, whether we sell it or we keep it, and this market by market so that we always will have not only a fee-based income by development fees, by construction fees, by operational and maintenance fees, but mainly also by asset-based income, right? So having said so, I'd like to turn the call over to Joe so that we can begin some questions and answers. Jules, if you could.
Ladies and gentlemen, we're going to conduct a question and answer session with questions that we've received over the recent period of the last few days. And we'll start with the question of what drove sales growth in the quarter from $7.7 million-$16 million.
Sam, you want to answer that one?
Sure. That increase is mainly due to the first is the EPC revenue increase by about $6.3 million. We finished the $7 million to the Manlius project last year, and we're working on the 21 megawatts worth the $43 million project for Honeywell. So that big jump from the $5.5 million to $12 million revenue for this quarter. And also, as Richard mentioned, that after the acquisition of Solar Flow-through, we end up with around $4 million IPP revenue this quarter.
Thank you. Next question. During the quarter, it looks like there was an incremental $2.2 million in gross profit on $8.3 million higher sales, good for about 26% incremental gross margin. What is the level of gross margin that you think would be sustainable for the company long-term?
Yes, it's the result of the implementation of our corporate strategy, you know, the transition from a developer and the EPC provider to the dev IPP positioning, a business model, as I illustrated. I think, you know, after the company finishes the Geddes project, which should be very soon, that, you know, and also we're currently building three battery storage systems in Canada and in Ontario, that I think the gross margin is expected to improve further.
Okay. Thank you. Next question. Would you talk, please, about the various revenue lines and describe which one we should anticipate being the largest of the three and which may have the best margin profile for the company?
Yeah. As I shared with you that over time that we are vertically integrated end-to-end company from development, engineering, procurement, construction, operation, maintenance, and as an independent power producer. If you think about the dollars that from those four revenue streams, which one will come first? That I will say it will come first from the EPC business because we always build the project ourselves and we're not depending on third party giving us EPC projects. We're not participating in RFPs, building other people's projects. So that in-situ project construction will always give us the largest revenue, I think probably in the next three to five years. The second to come online will be our independent power producer business.
With a foundation of $100 million of asset we own, we'll produce about $10 million revenue per year for the next 15-21 years, and we will see a significant growth in that regard. The third one will be our development revenue, and the development revenue is basically when we sell the project to parties such as Honeywell and such as Charlie's that we will get to build, and that revenue will be having a very healthy gross margin, and the amount should be able to sustain our burn rate, right, and as we grow our customer base, so comes the last revenue stream, which is the operating and the maintenance revenue, so those are the pecking orders in terms of dollar figures.
Great. Thank you. Next, operating expenses seem to grow at a similar rate of sales during the quarter. What is the longer-term target for operating expenses as a % of sales?
Sam, I think you'd be the good CFO counting beans all the time. Maybe you are the one to address that one.
Yes, so if we look at the whole, the IPP, renewable energy, the industry, we're looking at around the 20%-25% operating expenses to the total sales ratios among the comparable companies. PowerBank currently we're having, we will end up with like in the middle, 22.5% in the Q1, and the company is expected to lower the ratio and be more competitive in the future.
Thank you, Sam. Next question is, what is the current level of recurring revenue, and can you describe how that grows over time?
The company grew its IPP portfolio from, I would say, close to zero to 32.5 megawatts after it went public in 2023. The current IPP asset can generate around CAD 9 million or CAD 10 million of recurring revenue for the 15 years. That's a 20-year feed-in tariff contract with the Ontario government, and there's still 15 years left. The revenue certainly will increase further after we finish the Geddes project, which is a community solar project in New York State, which will be connected very soon. We also are building a 60 megawatt-hour energy storage and a capacity contract with the IESO, which will give us additional revenue, fixed income for the next 21 years. So those are the ones that we'll see over time that will grow significantly.
Okay. Thank you. Why is the company an income taxpayer if it's been losing money? Are there not net operating losses to cover the losses?
Sam, you are also the taxman.
Sure, so yes, it's a little bit weird. We end up with a very small number of the net income, and we had very big tax expenses on our financial statement. This mainly because the most revenue and profit were generated from our U.S. business, and we didn't have the loss carry for the U.S. entity. But keep in mind that we almost finished the Geddes project, leveraged the IRA. The project will generate about $3.7 million, the income tax credit for the project to offset the current year and the last year's income tax liability in the future.
Thanks, Sam. The next question is regarding your cash position, which is up $9 million during the quarter. Did you raise money?
No, we did not raise money. Joe, you know, as you know that I'm the founder and president CEO of this company, you know, coming from a utility background. For me, a safe, reliable, and low-cost operation is very important. That belief got us through a lot of ups and downs, and we have always kept cash positive so that, you know, we will not depend on raising money to keep the lights on. You know, certainly that, you know, if our shareholders, our investors want us to own more projects, that we will get the sponsor equity from our operations and/or from the market, but we only take the right sticky money to do so, right? So when we acquired the Solar Flow-Through Fund, which is well-run with the team over the last 10 years, and they came with about CAD 10 million of cash.
So that's the kind of, I would say, business acumen that your management team is delivering to the investors.
Excellent. Thank you, Richard. The next question. The recent U.S. election seems to have activated bears on Wall Street with respect to solar and clean energy names. What is management's view on the regulatory environment in a Republican administration in the U.S.?
I think, thank you for asking those questions again. I know it's very hot, and everyone is talking about the anticipation of a new administration. We feel very comfortable and confident with the new administration, right? Not only, you know, will enhance the tailwind on the industry that to build America great again, not only that to grow the domestic manufacturing capability to supply us that, you know, with more competitive product, right? Not only, you know, the establishment of this Department of Government Efficiency, which will hopefully reduce the administrative cost and the times and so forth, right? That's simply the reason I mentioned, if you look at the supply and demand, right, the demand will quadruple in the next 25 years. You know, you will need all the power to come online as quickly as possible to meet the demand.
You know, if you look at, you know, the industry, what they need, infrastructure renewal, right? Building, building, building, drill, baby drill, all of those. You need money. Where's the money coming from? Inflation Reduction Act provided a foundation for such a thing, right? And also, if you look at, you know, not only in Canada, but also in the States, the electricity business is a provincial or state jurisdiction. Every province, every state has its unique needs, and that they will continue with their policies put in place to supply the demand to satisfy their constituents. I think in those areas, we're really looking forward to the, I would say, next four years of significant growth of this company.
Thank you, Richard. This is the last question. Is there anything that's occurred that has been perhaps unexpected or unanticipated in the short time since the election results were announced?
I think before the election, a lot of people talk about sweeping changes and so on and so forth. I know nothing has happened. I know, you know, it won't happen until February when the new administration officially taking over the White House. But I will say, you know, the election certainly drove Bitcoin to a record high, right? Giving people confidence in digital economy. You know, there's a down pressure on the renewable project or stock, which is anticipated because people think that, you know, the new administration does not like renewables. You know, I think people probably didn't watch what Trump in the debate said, that he loves solar, you know? So it's anticipated. You know, I know there are a nuclear renaissance. I know there's a coming back of fossil energy. We anticipated that because renewable alone will not have enough power to meet all the demands.
We need all the power there is. Certainly, there's no policy immediate change. We have teams in the U.S. and Canada continue to be in public meetings, permitting activities. The response we receive from local authorities, from the public, remain the same, right? You know, as I also mentioned, everyone is looking forward to the Department of Government Efficiency that will be developed in the next four years. So we remain very confident and positive in this operating environment in the years to come.
Thank you, Richard. Ladies and gentlemen, this concludes the question and answer portion of the call. I'd like to turn the call back over to CEO Dr. Richard Liu.
I think, you know, this is our second time after the Nasdaq listing. You know, last time was the annual report. This time is our first quarter of fiscal 2025. I think this is an opportunity that we show our investors a scorecard, and we will continue to do so. I think, you know, from my perspective, you have a team that is very operational oriented that we are here to deliver. It is about, you know, supplied energy to power, you know, not only to keep your lights on, but to power all the economic activities. With that, I really look forward to your ongoing support, and I look forward to seeing you again in three months. I want to thank you all for your participation on today's call and your interest in SolarBank. We will deliver.
Thank you very much for being here with us. Thank you.