Good morning, welcome to the Kontrol Technologies Q4 full year 2021 earnings conference call. I'm joined by the CEO of Kontrol Technologies, Mr. Paul Ghezzi, and CFO, Mr. Claudio Del Vasto. Before we begin, please be reminded that certain statements and information included in the Management's Discussion and Analysis and financial statements and presentations, including information related to future financial or operating performance and other statements that express the expectations of management or estimates of future performance, constitute forward-looking statements. For more information on the company's forward-looking statements and risk factors, please reference the Management's Discussion and Analysis and the financial statements for Q4 and full year 2021. For all public information filings, please visit www.sedar.com. Thank you. I would now like to turn the conference call over to Mr. Paul Ghezzi, CEO of Kontrol Technologies. Mr. Ghezzi, you may begin your conference.
Thank you. Hello, everyone, and welcome to the Kontrol Technologies Q4 and full year 2021 earnings conference call. I'm joined on the call today by our CFO, Claudio Del Vasto. 2021 was a breakthrough year for Kontrol, driven by organic growth, innovation and strategic acquisitions. We delivered record results across our key metrics, as reflected in our year-over-year revenue growth of 367% to CAD 58 million, and adjusted EBITDA growth of 227% to CAD 6.5 million in 2021, while also achieving profitability on a net income basis. With the North American economy reopening and a new focus on sustainable infrastructure, driving an improvement in upgrade cycle in the commercial and industrial building sectors, the company is well positioned for future growth.
I'll provide an update on our business initiatives shortly, but first, I will turn the call over to Claudio for a review of our key financial metrics for Q4 and full year 2021. Claudio.
Thanks, Paul. Hello, and good morning, everyone. This is Claudio Del Vasto, CFO of Kontrol Technologies. As Paul noted, we achieved record growth in the Q4 and full year 2021. We're pleased to report that our revenue, earnings, and cash flow from operating activities all grew substantially in the year. Allow me to provide a very brief summary on our results. Revenues for the Q4 were CAD 28.7 million, an increase of 567% from the same quarter in the prior year. Revenues for the full year 2021 were CAD 57.7 million, up 367% over 2020 and well above our CAD 43 million-CAD 46 million guidance range. Gross profit for the Q4 was CAD 5.9 million, an increase of 238% from the same quarter in the prior year.
Gross profit for the full year 2021 was CAD 15.8 million, up 162% over 2020. Net income for the full year was CAD 1 million, compared to a net loss of CAD 1.9 million in 2020. Adjusted EBITDA for the full year 2021 was CAD 6.5 million, an increase of 227% from 2020 and in line with our guidance of CAD 6 million-CAD 7 million. Cash flows from operating activities for the full year 2021 were CAD 4.7 million, representing an increase of 200% from 2020. We improved our financial position through an early repayment of debt financing that totaled CAD 3 million in 2021. In summary, Kontrol delivered strong revenue and earnings performance, driven by growth across our platforms as we continue to strengthen our balance sheet.
I'll now turn it back over to Paul.
Thank you, Claudio. As we look forward to the remainder of 2022, we are focused on a number of key strategic initiatives that we believe will translate into further operational growth. These include, but are not limited to, the continued expansion of our energy technology platform across North American markets, the acceleration of the BioCloud technology through key distribution partners and driving organic growth within our existing markets through our cross-selling initiatives. Our expanding suite of building technology solutions, organic growth and strategic acquisitions are materializing in the form of significant operational momentum. The importance and necessity for enhanced intelligence to operate better, safer and more sustainable buildings is driving the ongoing building modernization process. From government policy, stakeholder activism, and the growing importance of social responsibility in corporations, solving the climate-related challenges are paramount.
Historically, the company has been focused on the addition of smart building technologies as a retrofit or upgrade to existing buildings. We entered the new construction market with the acquisition of Global HVAC & Automation in July 2021, which was our largest acquisition to date. We've been working diligently on the integration of Global's operations. To that end, we have recently announced two HVAC and automation projects in the combined amount of approximately CAD 24 million that showcases our ability to supplement our recurring revenue base with these larger contract wins. These projects are scheduled to commence in Q2 and Q3 of 2022. We continue to expand our BioCloud partners and distribution network as we continue to develop and enhance the technology.
Commercially, we've expanded our BioCloud footprint into Japan, the Middle East, and Europe as the movement to employ air quality monitoring is driving demand for innovative safe space solutions. We believe we're in the early stages of viral and pathogen detection becoming integral to building monitoring technologies, and we anticipate that BioCloud will be a catalyst for continued growth as we continue to secure additional commercial partners and increase our brand recognition globally. We recently launched our new consolidated brand for the carbon markets, Kontrol Carbon. GHG emissions and carbon credits are growing in importance to the global market as the move to net zero continues to gain momentum. The combination of stakeholder activism, corporate social responsibility, and government policy are providing the macroeconomic backdrop for the growth in this expanding market.
By leveraging our technology platform, we are enabling our customers to meet their social responsibility mandates and provide a path to monetize verifiable energy savings from efficiency projects and corresponding GHG emission reductions. We are well-positioned with both our industrial and commercial teams to capitalize on the many aspects of this market, ranging from carbon capture equipment supply, emission monitoring and reduction, and assisting our customers with carbon offsets. In a post-COVID recovery environment, supply chain disruptions have affected many businesses, including Kontrol. The global supply chain remains highly sensitive to disruptions and is not operating at pre-COVID efficiency, and we anticipate this will continue throughout 2022. Kontrol has experienced inflationary pressure in the labor market, consistent with many service and solution companies. Some of these inflationary costs are passed on to customers in the form of price increases, others will be absorbed over time.
While supply chain issues, along with wage and inflationary pressures have impacted the business, we continue to seek to navigate these challenges by adding more technology into our projects, working with our suppliers, and passing costs on to our customers where applicable. Despite these macro constraints, we have maintained discipline in the management of our P&L by limiting discretionary spending and working diligently to deliver positive adjusted EBITDA, and we'll continue to do so moving forward into 2022. Kontrol continues to be uniquely positioned to capitalize on what Morgan Stanley refers to as the ongoing building modernization super cycle. While we are pleased with the execution of our operating strategy in 2021, we have more work to do, and we look forward to continuing our momentum into 2022.
We are just getting started into the next phase of our growth ahead as we work to deliver sustainable value for our shareholders. I would like to take some time to thank our staff, our customers, and our partners for their commitment to Kontrol as we continue along on our journey. We are working diligently to continue to deliver strong financial performance while ultimately working toward our vision for a more sustainable future for all. We hope you continue to track our progress as we continue to innovate in the quarters and years ahead. I'll now turn the call over to the operator for Q&A.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will then hear a three-tone prompt acknowledging your request, and your questions will be polled in the order that they are received. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Tate Sullivan from Maxim Group. Please go ahead.
Hi. Thank you. Good morning. I'm following up your comments about BioCloud and safer buildings. Is your market opportunity supported by emerging regulations or is it mostly client-driven at this point please?
Yes. Thanks for the question. I would say it's multiple fronts. Building regulation is really what I would call regional, local. In Canada, it would be province by province. In the U.S., it would be state by state. New York and California would be leading the charge in the U.S. for more, we would call it, automation reporting and regulations around air quality. I believe the Biden Administration has just made an announcement on air quality. I think those are the opportunities where it's not just about filters and UV cleaning, it's about detection. What we have found with BioCloud is the primary interest tends to lean towards the HVAC systems and monitoring the air from that perspective.
That's where we've had success with our global distribution partners tend to be from the HVAC industry. Thank you.
Thank you. A follow-up, if I may. You mentioned global distribution partners. Is your ideal business mix going forward around the original equipment sales to those global distribution customers, or is it more of a recurring revenue opportunity related to the monitoring? Can you comment on the ideal mix?
What we've discovered through our process is the distribution model works the best for us because it does a number of things in terms of how we operate the balance sheet and the P&L. From a distribution partner perspective, it's a hardware sale, but also the recurring revenue from the replacement cartridges. Ideally, you know, the recurring revenue will grow over time, and from a pure market perspective, we do have some cases where we'll go direct to a customer conversation. Primarily, we focus on the distribution model, which, you know, saves us on the P&L and gives us an opportunity to add global brands to our partnership.
Okay. Thank you.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Jeffrey Campbell from Alliance Global Partners. Please go ahead.
Hi, Paul, and congratulations on the 2021 outperformance.
Thanks, Jeff.
You announced the addition of a U.S. REIT customer last week, which appeared to be a win for SmartSuite. A couple of questions. First, is the U.S. as a percentage of overall controlled business about the same as in the past, or is this growing? Second, do you think you're more likely to win U.S. work with your smart technologies versus the HVAC installations?
Yeah, thanks. Great question. I'm gonna answer it in a slightly different way. What we've discovered about the U.S. I would say we are primarily focused on the commercial Class B market, which is an underserved, under-technology market from the perspective of building automation is really lacking in that market. What we've discovered in the U.S. is that holds true the same as Canada. The real interest is coming from, you know, we own a number of properties and we have no visibility into our energy costs. Costs are rising, so that's going against us, and we need to get more control in place. What we offer, our technology is really designed as a cloud-based interface for the customer to have control. You could also call it building automation light.
That's really where the interest is. It's taken us longer to crack into the U.S., primarily because of COVID and on-site issues. Now we can travel, we can go on-site, we can do our deployments. The U.S. REIT we announced really started about a year ago, and it was just really a challenge to get on-site. I think that's behind us, and the interest is coming really towards the technology. What can you do for me? What visibility can you give me? Then the bigger question is, if I've got, you know, 20 buildings, how do I get all of them online in a unified platform? I think that's one of the areas that we hold a competitive advantage, because really we designed the technology for that purpose.
We are excited about moving into the U.S. and growing that part of the business.
Okay, great. I appreciate that color. You referenced the approximately CAD 25 million in recent HVAC wins. I just wanted to ask if these and perhaps any unannounced HVAC work has contained predominantly vanilla equipment or is anything cutting edge like the VRV, VRF technology that you've discussed in the past, starting to get installed?
Yeah. I would say the industry is moving from what would be a traditional fan coil unit heating, cooling HVAC to heat pumps, which are more efficient, and then VRF, VRV, which are even more efficient. It's really project by project. Some of these projects will be 3-4 years in development, you know, before they start to get built. That really depends on when they started. My view on this is within the next 5 years, everything's gonna be VRF, VRV, and there's gonna be a good chunk that's geothermal. Those projects will start being planned and developed today, and I think we'll see close to 100% movement away from traditional HVAC. We're prepared for that, and that's something that we talk about and think about quite a bit.
If you can gain expertise in your staff and that knowledge, it does provide you with an opportunity to, let's say, take an existing customer to a new platform or compete better in the market. The other thing we're adding is our technology into the building as a value in terms of more monitoring, more technology from the control side into the global HVAC side. Overall, we've been very pleased. Of course, there's a lot of work to do when you acquire a company that's that size. There's more integration work. There's other processes and technologies that we wanna add. I would say it's off to a great start and more to come on that.
Right. In the context of BioCloud partners, I just thought to ask, how you assess the work with Steelcase that's progressing at this time?
The way we think about our partners is, you know, we like to add global brands and, they have their own customer base and, you know, we allow them to do essentially they do their own marketing spend using our products. I think it's a big win for us to have these large firms marketing the BioCloud technology for us. I would say, you know, quite conservatively, it's saved us millions of dollars in marketing. There's a big win right there. It's put us in front of, you know, some pretty interesting opportunities. Overall, we're pleased with the uptake on the distribution partnership. BioCloud is a new technology. It's innovative. You know, it hasn't been around for that long.
For us to be able to attract global brands and partners, you know, we're very pleased. The other thing with BioCloud, which is quite different from our energy technology, is it puts us on the global stage. It is our one technology where we're having, you know, discussions around the globe. Much of those we've press released. I think we've been very pleased with BioCloud being part of our overall revenue and technology and innovation. Thank you.
Well, to follow that up, and not to put the cart before the horse, but do you foresee the possibility that these global conversations that are starting with BioCloud could eventually lead to work for the other parts of the Kontrol portfolio, or do you think it's gonna tend to be more limited to BioCloud over time?
Yeah, great question. I would say where that is true is in customer conversations. When you're talking about HVAC, you're today, in today's world, you're always talking about air quality. In terms of our distribution channels, you know, most global HVAC companies will have their own technology. There are synergies around, you know, the way we operate in buildings from a software perspective. Typically, large HVAC manufacturers or distributors are lacking that piece. There have been some conversations around that. I would say what's really happened is those local markets are opening up to us because we're in those markets with our distribution partners. We have had other opportunities on the energy management side. While it's not a perfect cross-sale, I would say one definitely helps the other.
Okay, great. No, that's helpful. Let me ask a final question. Could you talk about Kontrol Carbon a bit? Should we think of this as essentially an expansion of the original carbon credits efforts? I ask 'cause it sounds like the greenhouse gas emission verification, the carbon offsets, carbon capture, that might require some new hardware or maybe some new software beyond what you were talking about earlier.
Right. I would say, think about it from an industrial and commercial perspective. The Kontrol Carbon brand is meant to capture our work in both. The initial press release was around our commercial efforts in buildings, energy efficiency projects, and monetizing verifiable credits. On the industrial side, we have customers that are, you know, blue chip global companies in the oil and gas sector, the cement sector. They've got a different problem. They're gonna be forced to do things that include carbon capture or significant reduction that don't apply to the commercial sector. On the industrial side, we've discovered an opportunity to support carbon capture through better monitoring, equipment sales and helping those customers. Those tend to be regulated customers that you know have to follow state, local, federal policy.
Two different markets, different solutions, but we are gonna aggregate those under our one brand, which we define as Kontrol Carbon.
Okay, great. Thanks for the clarification, and best of luck in 2022.
Thanks again. Thank you.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. You're next. Okay, there are no further questions at this time. You may proceed.
Okay, that's great. Thank you very much. Thank you, operator, and thank you everyone for joining the call. We appreciate you spending time with us, and we look forward to continuing to work toward operational excellence and drive sustainable value for our shareholders going forward. If you'd like to connect with us, please email us at info@kontrolcorp.com, or you can reach out to the MZ Group, our investor relations firm, for any questions you may have. Thank you and have a good day.
Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.