Hello everyone, and thank you for joining us for today's Anaergia Q1 2025 conference call and webcast. My name's Drew, and I'll be the operator today. During today's call, after the prepared remarks, there will be a Q&A session. If you would like to register a question, please press star followed by one on your telephone keypad, and to withdraw your question, it's star followed by two. It's now my pleasure to hand over to Darlene Webb to begin. Please go ahead when you're ready.
Thank you very much, Operator, and good morning, everyone. On today's call, we'll be discussing Anaergia's earnings for the first quarter of 2025, which ended March 31, 2025. If you're following along with our Slides, my comments are directed to Slides one, two, three. On Slide two, you'll see that on our call today, I am joined by Mr. Assaf Onn, Anaergia's Chief Executive Officer, Mr. Greg Wolf, Anaergia's Chief Financial Officer, and Dr. Yaniv Scherson, Anaergia's Chief Operating Officer. Before beginning our formal remarks, we would like to refer you to Slide three of the presentation, which contains a caution on forward-looking information and a note on the use of non-IFRS measures. Listeners are reminded 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 anticipated in these forward-looking statements. Anaergia 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 prospectus, which is filed with Canadian Securities Regulators. With that, I'll turn the call over to Assaf.
Thank you, Darlene, and good morning, everyone. We are now on Slide four. When I step into this role, we said Anaergia would do three things: simplify the business, focus on execution, and restore financial discipline. Nine months later, guess what? We're doing exactly that through discipline, expansion, and our strategic growth. We said we would move towards a capitalized model. We have. We said we would grow our capital sales business. We are. We said we would control cost and stabilize operation. We're doing exactly that. Moving to Slide five. This quarter results show progress we expected to make. In several key areas, we are ahead of where we plan to be. Our capital sales performance is above target. Our backlog has more than doubled compared to the same time last year, and that momentum continues to grow. This is not a one-time event.
It reflects a steady commercial activity, the strength of our technology, and the ability to deliver. We are now on Slide six. In Q1, we took deliberate steps to strengthen our capital market presence with Anaergia now trading on the OTCQX under the ticker ANRGF. This listing enhances visibility, improves accessibility for our U.S. investors, and aligns with our focus of building long-term value through disciplined execution. We are now on Slide seven. The message is clear. We are executing, we are growing, and we are entering this year with strong momentum. We could not have reached this point without the people who make it happen every day. Energia 2.0 is more than a strategy. It is a shift in mindset, one that is now fully embedded across the company. Our teams are aligned. Our priorities are very clear.
Across every part of the business, the focus is the same: execution, accountability, and results. The progress we are seeing is not the result of one or two decisions. It is a product of consistent follow-through every day. We are not easing off. We are moving with purpose and maintaining the discipline that has carried us this far. We are proud of what we have accomplished to date. The signals are strong, and we believe we are well-positioned to continue building a stronger and more resilient Anaergia. To take you through the numbers and execution, I will now turn the call over to Greg, followed by Yaniv. Take it over, Greg.
Thank you, Assaf, and good morning, everyone. Let me take you through the financial results for the three months ended March 31, 2025. On Slide eight and nine, revenue for the first quarter was CAD 24.9 million, a modest decrease of 0.4% or CAD 93,000 compared to the same period in 2024. This minor decline was primarily due to a slightly lower capital sales and food revenue, partially offset by an increase in O&M services. Regionally, we saw a decrease in revenue in APAC and Italy, while North America grew, supported by new capital sales projects and increased service activity. Gross profit for the quarter was CAD 5.4 million, down 16.6% or CAD 1.1 million compared to CAD 6.5 million in Q1 2024. Overall gross margin for the quarter was 21.7%, down 4.3 percentage points compared to 26% in the same period last year.
The overall decrease was driven mostly by lower profitability in the food segment that was partially offset by a larger increase in the capital sales gross profit. Capital sales gross profit margin more than doubled to 26.8% in Q1 2025 compared to 12.1% in Q1 2024. This is our core business in our new capital light model. I'll take you over to SG&A. SG&A expenses for Q1 2025 were CAD 17.2 million, an increase of 3.4% or CAD 569,000 from CAD 16.6 million in Q1 2024. The increase was primarily due to a specific CAD 2.95 million reserve against accounts receivable balance. Excluding that item, SG&A would have declined 14.3% to CAD 14.2 million, reflecting continued progress on ongoing cost reduction efforts. Net loss for the quarter was CAD 5.9 million, a 48.6% or CAD 5.7 million improvement compared to a net loss of CAD 11.5 million in Q1 2024.
This was primarily driven by increased government grant income recognized during the quarter, along with continued reductions in SG&A expenses, excluding the specific accounts receivable reserve. Adjusted EBITDA for the quarter was a loss of CAD 3.9 million, reflecting an improvement of 34.5%, down CAD 2.1 million from a CAD 6 million loss in the same period last year. This improvement was primarily driven by the decrease in net loss as well as add-backs of RIBF income tax credit transaction costs in the first quarter of fiscal year 2024 that did not reoccur in the current quarter. Slide 10. As of March 31, 2025, our total revenue backlog increased 94% to a record of CAD 200 million, from CAD 103.1 million at year-end 2024. This increase reflects strong execution of new contracts in Q1, specifically in Italy and North America.
Of our current backlog, CAD 182.4 million is attributable to capital sales and CAD 17.6 million to long-term O&M services. This backlog is measured under our refined definition, which includes only signed capital sales contracts and three years of modeled revenue for multi-year O&M agreements. We are highly encouraged by our growth in backlog and the project execution that will begin to follow. In addition to this backlog growth in Q1 2025, we continue to be awarded other new significant contract wins, which we have publicly announced since the end of the first quarter. It reinforces the momentum we are seeing in key markets and supports our expectations for continued growth. We are now on Slide 11. In Q1, we also successfully added a financial arrangement that has been a valuable support tool for our growth.
On February 5th, 2025, we entered into a new CAD 13.9 million line of credit with the Royal Bank of Canada, guaranteed by Export Development Canada. The facility is valid through January 31st, 2027, and is intended to serve as collateral for letters of credit required on certain capital sales contracts. In summary, our Q1 performance reflects operational discipline and continued progress under Energia 2.0. We delivered a meaningful improvement in net loss and adjusted EBITDA, lowered SG&A costs, excluding the specific accounts receivable reserve, and now have a record backlog that has nearly doubled since year-end. Our trajectory is clear. We have reshaped the business with focus and intent to become capital light, leaning into capital sales strategy, and a return to our core of technology, engineering, and execution through the strength of our people. With that, I'd now like to turn the call over to Yaniv for an update on operations and project execution. Yaniv.
Thank you, Greg. We're now on Slide 12. Our focus this quarter remained on disciplined execution through delivering projects on time and on budget, and deepening relationships with key partners in strategic markets. We are seeing the success reflected by our growing backlog and new opportunities coming to us, particularly from top-tier customers with multi-project orders. Let me walk you through several of the highlights. In Italy, we continue to build momentum. In January, we signed a binding agreement with TechBio to construct five new biomethane facilities across southern Italy. Valued at more than CAD 27 million, this agreement sees Anaergia supplying our proprietary anaerobic digestion technologies and core equipment, while TechBio leads construction. These plants are expected to be connected to the gas grid by mid-2026.
In March, we received formal notice to proceed from the city of Fermo, Italy, for a new municipal waste treatment facility. Valued at approximately CAD 9 million, the facility will include anaerobic digestion to process more than 35,000 tons of source separated organics annually. It's expected to generate approximately 31,400 megawatt-hours of biomethane per year, which will be converted into renewable compressed natural gas for vehicle fueling. The project further expands our municipal footprint in the region. Commissioning is targeted for mid-2026. Just days later, our Italian division signed contracts with entities owned by QGM to deliver two additional biomethane projects in northern Italy, located in Comparo and Dero Verde. Each facility is expected to process more than 50,000 tons of agricultural waste annually. Together, these projects represent a combined contract value of more than CAD 46 million.
Anaergia is serving as the engineering, procurement, and construction contractor and technology provider for both sites, which are expected to be operational by mid-2026. Together, these initiatives significantly strengthen our position in Italy and demonstrate growing demand for Anaergia solutions across both municipal and agricultural applications. They also reflect the growing momentum behind the REPowerEU incentives aimed at accelerating renewable natural gas adoption across the European Union. Now over to Japan. Our Singapore-based subsidiary signed a letter of intent with JGC Holdings, one of the country's leading engineering firms, to deliver a facility that will convert 61,000 tons of organic waste annually into 1.7 million cubic meters of renewable natural gas. With Japan's clean gas certificate system and 2030 carbon neutral gas targets now in place, we are well-positioned to support one of Asia's most ambitious clean energy transitions.
In Singapore, we continued delivery of the Integrated Waste Management Facility, a multi-phase capital project located at the Toisou Basin. The project is approximately halfway complete and, once operational, will serve as the largest outlet for food waste recycling in Singapore. This initiative is part of Singapore's long-term strategy to integrate waste and wastewater infrastructure. In North America, we are advancing upgrades at the Renewable Energy Anaerobic Digester, or REED, facility at the University of California, Davis. Supported by a grant from PowerCycle, this more than CAD 7 million project will increase throughput and system reliability. These improvements help California meet SB 1383 targets for methane reduction and organic waste diversion, while strengthening our long-term partnerships with UC Davis. Across all active and planned sites, our customers are leveraging our deep know-how and vertically integrated capabilities across engineering, technology supply, construction, and operations to ensure project success.
We are also continuing to advance our build-own-operate platform. We're now on Slide 13. Our Southern California facility, Silca Biomethane, continues to operate profitably and serves as California's first co-digestion plant injecting gas to the grid. In Q1, we completed upgrades that expand food waste co-digestion capabilities. At the Rhode Island Bioenergy facility, the plant is running stable with continued ramp-up and delivering renewable natural gas to Irving Oil in Canada, with participation in Canada's Clean Fuel Regulation. It remains the largest anaerobic digester plant in New England. In our boost segment, revenue was CAD 4 million, down modestly from CAD 4.1 million in Q1 2024. The slight decline reflects the planned idling of our Charlotte facility in February, a decision made to reduce operating losses and improve project economics as we prepare the site for future conversion to RNG. Both Charlotte and Riverside remain in development.
Charlotte continues in a temporary idled state as we complete permitting and advanced construction planning. Riverside is progressing through pre-construction with development work underway under an existing capital sale contract with the city. These sites remain important to our long-term build-own-operate strategy, and we are taking a disciplined approach to ensure their success. Together, these updates illustrate not only the progress we're making project by project, but also the consistency of execution that now reflects Energia 2.0. Moving to Slide 14. None of this progress would be possible without the people who represent Anaergia every day, on-site, in meetings, and on the front lines of delivery. They are the face of our company to our customers and partners. The pride they bring to their work is reflected in the trust we're earning and in the momentum we are building around the world.
Their focus on execution, accountability, and results is what drives Energia 2.0 forward, project by project, milestone by milestone. We're seeing the strength of that execution reflected in our backlog, which, as you have heard now, stands at CAD 200 million. That momentum is being driven by the consistent delivery of projects, strong partner relationships, and the confidence we're building in key markets. Our focus remains on converting that backlog into results efficiently, reliably, and at scale. With that, I turn the call back to Assaf for closing remarks. Assaf?
Thank you, Yaniv. Today's results speak to more than a strong quarter. They reflect a company that is aligned, disciplined, and moving in the right direction. We are building momentum, not with noise, not with promises, but with results. Energia 2.0 is not a pivot. It's a commitment to performance, to accountability, to delivering what we said we would do. Energia 2.0, no talk, execution. With that, Darlene, I'll turn back the call to you.
Thank you, Assaf. Operator, we can now open the call to questions.
Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. To withdraw your question, it's star followed by two. Our first question today comes from Craig Irwin from Roth Capital Partners. Your line's now open. Please proceed.
Good morning, and thank you for taking my questions. First, I should start by saying congratulations on the impressive growth in backlog, a big achievement. Now, if we dig down into the bookings there, you gave us three projects that are pretty substantial: TechBio, Fermo, and then Northern Italy. I'm going to mispronounce the partners' names there, so the $46 million booking. If we actually take those out, I mean, you doubled sequentially, right? If we take those out, it looks like you still have a mid-teens growth rate sequentially in the backlog. Can you maybe talk to us a little bit about the diversity of projects that you're booking equipment for? Are these projects smaller in nature or larger? Is this kind of positive momentum something that you think is sustained over the next few quarters?
The project we have is actually a mix and match. Okay? We have some projects that are smaller. We have quite very large projects that we have already signed. The bottom line is that the market is booming, and we are right on the correct path of making sure that Anaergia is known to everyone. As far as we're concerned, this is a pivot year. This is a year that we can show our growth. Yaniv, maybe you can help me here.
Yeah, of course. Craig, thanks for the question. A couple of points to highlight. The backlog reflects trailing bookings that we're still executing, predominantly from North America and Europe, from 2024 carrying into 2025. The projects that you see now being booked, we do believe that they are going to be sustained for multi-quarters. The reason being is that we're seeing a trend of multi-project orders from single customers, particularly in the case of Europe and also in the U.S. and our municipal segments. An example of some of the announcements that we've made are major players, utilities, or IPCCs in Europe that have committed to ordering multiple projects, two, three, nine-type numbers.
We're seeing this tailwind continue in Europe, particularly backed by the REPowerEU incentives and increasing demand, particularly in the Iberia region that is very much untapped and we're very strategically positioned, Iberia and Italy, for the certificates of sustainability. As far as project size, we don't expect any change in follow-on future bookings of projects that are both in the sub-10 million and in the above 20 as we move forward, both, as I said, in the private agricultural sector as well as the municipal sector.
Understood. Understood. You used the word, Yaniv, untapped, which I kind of like. Can you maybe frame out for us how busy you are addressing potential customer projects north of $25 million in potential commitment?
Yeah, of course. Can't give specifics for projects we haven't announced since, of course, but certainly there are large regions in the places in Europe, particularly where we are building now, that I say untapped because there are feedstocks. These regions are fairly underdeveloped as far as just count of digesters, Portugal, Spain, Italy in particular, and are backed now, in the case of Italy, by a continued government support for a government-backed incentive scheme that has continued for a number of years now and that we are taking advantage and leveraging for our customers, as well as our presence there with references that are successful and being known as a dominant player with industry-leading experience. The driver in Italy is really a government-backed incentive scheme that the government has continued to support. In Iberia, Portugal, and Spain, there's really an untapped market, and we are very strategically positioned.
Much fewer digesters in this area. They have not traditionally been backed by government programs, but there is strong incentive from the REPowerEU directive, and demand for that renewable natural gas or biomethane, as we call it in Europe, is booming. It is leading major players like major utilities to get into the space who are partnering with us because of our experience. To state the obvious, we are extremely busy, particularly in Europe. Our main focus is sustainable growth, ensuring that we are getting the resources in place so we can execute successfully because it is an unprecedented wave that we are seeing in these markets, again, places that historically have had few project counts.
Understood. Understood. So then a financials question, right? I know you've worked hard this last year to bring down your operating expenses and to make sure that where you are spending money, it's directly facing the opportunities that can deliver a credible return. The $17.2 million in SG&A in the quarter, is that really sort of a fair base level of spending for us to expect maybe an increase over the next couple of quarters as 2025 unfolds? Or was there anything maybe one-time in nature where we could see SG&A spending trend down?
Yeah, Craig. Yeah, for the quarter, we did a reserve for a specific accounts receivable about close to $3 million. If you take that out, our run rate's in the $14 million range for the quarter. I would say our run range going forward is somewhere probably a little bit north of that, but it's probably, call it $15 million-ish or so, if you wanted to level set it, maybe slightly under. That's where we would see it in general. We do not really give guidance, but if you take this quarter and you take that one time out, then you see where we're at for the quarter. We do not expect increases in SG&A. We expect to continue to work on reductions there and just right-size the business as we move forward.
In addition to the other comment, we have increased spending in areas such as sales, and that's why geographically we continue to spread out our footprint. When we talk about project work, we have large projects, as you noted, and we also have a lot of smaller projects, a lot of EP-type work. From our standpoint, the EP work we'll do anywhere in the world because we could do it from any of our locations, from the U.S., from Italy, from Singapore, and use our engineering services from those places. Our equipment sales then can be shipped in for that, for the product side of it. We really enjoy the EP side of the work, and that could be $5 million-$10 million type projects. That's a really good comfort zone for us. It's good work, and we like that, especially in areas we don't have.
We can do EPC, and we'll do that in the U.S. and some in Europe. That's only because we know the contractors that can do the larger projects with us. Outside of that, the EP work that we receive throughout the world with the seed money we planted in different regions is very instrumental for us. Now we have a much further reach, and we can now leverage all of the offices that we have in the engineering side, and our procurement can happen, and then we send some people over for the commissioning part of it. That's really the global strategy, and we will take on the bigger projects, like I said, in the U.S. and Europe.
Excellent. Excellent. Last question, if I may. I know your first quarter is often impacted by either mix or the early shipment into new projects that are going to be a more material contribution over the year. Can you maybe talk us through the sequential or year-over-year margin progression? Was there anything specific in there from a project basis or from a mix basis? There was a delta versus these other comparable quarters. How do you feel about the margin trajectory over the course of the year?
We're very positive on the margins over the rest of the year. This quarter, overall margins were down a little bit, as noted. Our capital sales margins remain, obviously, we were at 26.8% in this quarter if you look in the MD&A, which was up last night. Really where we suffered a bit this quarter was just in some of our BU assets as we continue to ramp up on a few of those. That has been a little bit of a drag on our overall margins. Our core business of cap sales is very strong. We're very comfortable with where we're at on the margin side of that business. As you see in our backlog, that's the majority of our forward work. The BU assets will continue to ramp up and become more of a contributor to our overall margin. That's a little bit of a drag that we had in the first quarter on our overall gross margins. Again, our cap sales margin, which is really what we're moving towards, is very strong.
Understood. Actually, if I can squeeze one last one in, I have not yet seen this in MD&A. I need to review it more carefully. Did you share a 12-month backlog number for the $200 million print that you gave us? I mean, is there anything you maybe can share if it's not in the MD&A discussion?
We do not share a forward-looking backlog number, obviously, because obviously we do not know where we are going to end up at. We know internally, but we do not share that piece. However, those projects that we have on there, the duration of those can be anywhere from, I mean, some of the smaller EPC work could be probably like eight months, twelve months, maybe somewhere in that range. The other bigger projects could be 18 months to 24 months. There is a run-off. As you know, in construction, there is that kind of a bell curve. As you start ramping up, it is a little bit slow at first, and then you get heavily into it. At the end, there is always a slower tail. That is where we see it.
Our goal is to continue to build backlog, continue to start execution on these projects that we just rewarded, as well as our core business. That pipeline of backlog growth will add the consistency to our numbers and our growth over time. That is really the strategy here. I think, as Yaniv had mentioned, the market is very, very young in this area, and the opportunities are everywhere. With our geographical footprint now, it is getting better and better for us to see what is available in markets that we were not in before. Again, with a low-risk EPC-type project work that we can come in with, it is a really good formula.
Great. Congratulations on the strong business capture. I look forward to seeing you guys generate some profits. I think that's not too far out. Thank you.
Thanks, Craig.
Thank you. Our next question today comes from Adam Forsyth from Longboard Capital. Your line's now open. Please go ahead.
Thanks very much. Thanks, everybody, for the call so far. First question, just going back to that margin point, I did wonder, it does feel a lot like mix and really very much a quarter story. Moving forward, I wonder, are there any particular supply chain issues that are either areas of concern for you or even areas which we might see things improving in either side of the business? My second question, just a little more general one. The Italian projects you have using agricultural feedstock, are any of these under the Biogas Done Right Program, the one using cover crops as part of crop cover cycling, or are they just really all just pure agricultural waste? Thanks.
Yeah, projects are agricultural waste. Yeah. The projects are agricultural waste predominantly. The supply chain issues certainly have been a risk that we have mitigated quite extensively. Anaergia advantage is global presence and procurement options. We always keep the Rolodex of multiple vendors to pivot to in the event of a delay or supply chain issue with any particular piece of equipment. As you know, we are also vertically integrated and manufacture ourselves key components, which gives us much more control on schedule and quality of delivery and helps us navigate to competing priorities. Thirdly and lastly, one of the biggest powers we have here is the buying power with multiple projects. The scale is a tool to our benefit of improving margins on our projects with multiple simultaneous orders, with discounts as an example, and giving us a greater advantage than we've had in the past to control supply chain, mitigate risks of supply chain, and costs.
That makes a lot of sense. That's great. I mean, one area we've seen in the past from some of the people is compressor costs. To the extent that that's an issue for you, has that been a problem in the past, and are you seeing this coming down there?
The answer is, yeah, prices, demand's going up. As I said, particularly in Europe. Yes, we are dealing with cost variability. We have strategies with multiple vendors, multiple geographies that we can procure and manufacture. Ultimately, we've also done a pretty good job of pre-ordering to lock in our orders and our inventory in advance to mitigate those risks because we have high confidence, as evidenced by the releases in Q1 of large orders coming down the pipeline.
Sure. That's great. That's really helpful. Thanks.
Thank you. We have no further questions in the queue at this time, so I'll hand back over to Darlene Webb for some closing comments.
Thank you again, Operator, and thank you, everyone. As always, for additional information or should you have any questions, please contact the IR team at ir@anaergia.com or visit us online at anaergia.com. Thank you all again for your time today. Operator, you may now end the call.
Thank you. That concludes today's call. You may now disconnect your line.