Good afternoon, everyone. Welcome to the Greenlane Renewables First Quarter 2025 video conference. My name is Darren Seed, President of Insight Capital Markets, responsible for investor relations at Greenlane. I'm joined today by Brad Douville, Greenlane's Chief Executive Officer, and Stephanie Mason, Greenlane's Chief Financial Officer. We'll begin with prepared remarks, followed by Q&A, which I will moderate. Before beginning our formal remarks, we'd like to remind listeners that today's discussion may contain forward-looking statements that reflect the current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Greenlane Renewables 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 annual information form, which has been filed with the Canadian securities regulators. Please feel free to submit any questions you have through our investor email address at ir@greenlanerenewables.com. Now, over to Brad.
Good afternoon, and thank you, everyone, for joining us today. Let me begin by updating you on the execution of our 2025 strategic plan. In short, we are on track. As a reminder, I set out in my letter to shareholders earlier this year three pillars of Greenlane's 2025 strategic plan. Those include: one, continued sales growth in the most profitable segments of our business, including biogas desulfurization products, parts and service, and technology licensing; two, development of our compelling next-generation landfill gas upgrading product line; and three, improvement of profitability of our core upgrading system segment. Our aim as a company is making renewable natural gas projects more accessible and scalable by solving the industry's most challenging problems.
From a technology perspective, the most important problems that need solving are coming down the cost curve and climbing up the performance curve for biogas desulfurization and landfill gas upgrading technology. Every biogas project has hydrogen sulfide that must be removed. Of the various feedstock sources for RNG production in the Americas, 60%-70% of it is from landfill gas. We've solved the hydrogen sulfide removal problem with our biogas desulfurization product line that has set the standard in Italy and is increasingly being adopted in global markets. The problem with today's landfill gas upgrading technology is achieving low cost and high methane recovery at the same time when high levels of oxygen and nitrogen, which are commonly found in landfill gas, need to be removed.
Greenlane is solving this problem by developing and bringing to market our next-generation landfill gas upgrading product line that incorporates the content of new patent applications we filed in December. As we strive to advance the state-of-the-art of technology in our industry, we are not only actively expanding our intellectual property portfolio, we are also deepening strategic partnerships and advancing plans to localize manufacturing in key markets, including the U.S. and Brazil, positioning us for long-term growth and operational resilience. During the current period of economic uncertainty driven by new and changing U.S. tariffs, the focus of infrastructure investors in the U.S. appears to be on optimization of the large number of RNG-producing assets constructed over the last few years while taking a wait-and-see approach on new project starts.
In Canada, with the newly elected Liberal government, who campaigned in part on building a clean economy and tackling climate change, we are optimistic about new support for R&D projects. In Brazil, the new biomethane legislation under the Fuel of the Future Law that came calls for a 20-fold production increase. In Europe, a market increasingly dominated by anaerobic digestion of agricultural residues, we see continued investor enthusiasm for biomethane and demand for our products and services. All of this bodes well for our strategy because our biogas desulfurization products and our parts and service offerings play an important role not only in new projects but also in optimizing existing ones. The time is now to be developing and bringing to market our next-generation landfill gas upgrading product line. I appreciate your continued support, especially given the short time frame between our last call and today's.
I look forward to keeping the public informed of our progress. Also, I want to thank the Greenlane employees for the continued hard work, passion, and drive for results. With that, I'll now turn the call over to Stephanie.
Thanks, Brad. Good afternoon, everyone. As a reminder, all figures are in CAD unless otherwise stated, and all comparisons are for the first quarter of 2025 against the first quarter of 2024. As Brad noted earlier, and I stated in our release, we are on track with our strategic plan for the year. In the first quarter, we delivered CAD 7 million in revenue and a solid gross margin of 40%, reflecting the shift in our focus to profitable revenue. During the quarter, we saw a CAD 0.4 million improvement in services and spare part sales. This was offset by a CAD 10.7 million reduction in system sales and a CAD 0.8 million reduction in revenue from royalty contracts in comparison to the same period last year.
While we reported an Adjusted EBITDA loss of $1.1 million, our CAD 21.2 million sales order backlog compared to CAD 21.8 million as at December 31, 2024, and strong cash position of CAD 16.2 million, consistent with the cash position as at December 31, 2024, along with no debt, underscored the strength of our fundamentals. Our gross margin in Q1 2025 of 40% improved from 26.5% in the first quarter of 2024, which is about a 1,400 basis point increase. This reflects the updated company strategy and was largely the result of a change in product mix and expired warranty provisions. The company has a portfolio of active projects at different stages of completion and at different gross margin levels. As I noted, we reported an Adjusted EBITDA loss in the first quarter of $1.1 million versus a $0.8 million loss in the first quarter of 2024.
The company incurred an operating loss from continuing operations of CAD 1.4 million in Q1 2025 compared to a loss of CAD 1 million in Q1 2024. Net loss and comprehensive loss from continuing operations in the first quarter was CAD 1 million compared to a loss of CAD 0.8 million in the comparative quarter of 2024. We maintain our optimistic outlook on the year and look to improve these Adjusted EBITDA results. While there was no royalty revenue recognized from technology licensing contracts in Q1 2025, advanced payments of CAD 3.3 million received under the technology licensing agreement with Zeck Biogas that are included in deferred revenue were considered fully earned in April 2025 and will be recognized as revenue at a gross margin excluding amortization of CAD 2.8 million in the company's second quarter 2025 results.
Further to my comment on the company's sales order backlog of CAD 21.2 million, the sales order backlog is a snapshot at one moment in time, which varies from quarter to quarter. The sales order backlog increases by the value of new system sales contracts and is drawn down over time as projects progress towards completion and amounts recognized in revenue. Note that sales order backlog does not include revenue from contracts in connection with services and spare parts, given their small individual contract values or royalties. We remain focused on operational discipline and execution as we work to convert our backlog into profitable revenue, grow sales in our most profitable segments, and drive long-term value for our shareholders. We look forward to keeping you appraised on our progress. Let's go over to Darren for the Q&A.
Thank you, Stephanie. Today's negative Adjusted EBITDA of $1 million seems a bit out of line when compared to the last two sequential quarter results. What can you say about your continued drive to improveA adjusted EBITDA off the back of today's results?
Yeah, so our results reflect our focus on profitable revenue streams. The negative adjusted EBITDA in Q1 is mainly driven by our decrease in revenue during the quarter. While revenue went down, our gross margin improved, and we also did not see the same incremental decrease in our operating loss. This shows that our focus on generating profitable revenue and cost reductions is going ahead as planned. We also highlighted that in Q2 2025, we will be recognizing CAD 3.3 million in royalty revenue from the technology licensing agreement with Zeck Biogas. That is going to provide a pretty positive impact on our EBITDA results.
Thanks, Stephanie. Following to the first question, we can, when can we expect to see tangible growth in sales from the profitable segments of Greenlane's business, including biogas desulfurization products, parts and service, and technology licensing, as communicated in your 2025 strategy?
Yeah, maybe let me take that one. Great question, Darren. We're already seeing the growth of the profitable segments in our business. Firstly, with the parts and service business, that's grown Q1 in 2025 over the same period last year, about 23%. When we talk about the growth of the biogas desulfurization product line, we account for that in the system revenue in our books. That's really a function of mix. Steph already talked about the focus on profitable revenue streams. We're seeing that already. That's where we're accounting for it.
Thanks, Brad. How is management planning or navigating this currently uncertain, shall we say, and volatile macro environment, particularly out of the U.S.? How is this current administration's change to environmental policy impact ongoing projects in the U.S. and potential projects here in 2025?
Yeah, I'll take that one too. I think, obviously, with the movement and putting the tariffs in place in the U.S., that's caused a bunch of things, a bunch of actions. One of the actions that we're seeing in the U.S. market is really investors, infrastructure investors. They don't like uncertainty. They're taking a bit of a wait-and-see approach. At the same time, they've got RNG producing assets. A ton of them were put in place over the last several years because there was a building boom in the U.S. market for RNG projects. Right now, the time is ripe for these same investors to do optimization of those assets. We believe we're well positioned with our services and particularly our biogas desulfurization products to provide fast paybacks with minimal investment to help optimize those assets.
Now, when it comes to legislation in the U.S., to be honest, we're not seeing anything dysfunctional with the RFS, the Renewable Fuel Standard. We're seeing things take its course with the LCFS in California. There was already a bunch of activities in place by the ARB to enhance that program that would have the net result of driving up the credit pricing, which is a good thing for RNG markets and necessary to continue to drive the carbon reductions that they're looking for in California. Those things are all happening. They're on track. I would say that right now, because there's so many other priorities within the U.S. administration, we're not, again, we're not seeing anything negative happen on the RFS. It's just kind of doing what it's been doing since 2005 when it was put in place. We should also think about the other geographies.
In Canada, we just elected a new Liberal government. That government was put in place, again, with a real sense of building in Canada, creating the strongest economy in the G7 has been the tagline that we've heard. That has a consequence for building energy infrastructure across Canada. Energy infrastructure is needed of all types. We know that in Canada versus the U.S., there's a bit of there's still an adherence to climate change is important. Voters provided their opinions on that. That matters. The U.S. narrative on that is more energy dominance. That's okay because that means energy of all forms are embraced. That's what we heard from I was at some conferences over the last few weeks. Representatives from the U.S. government commented on energy dominance being the theme, which means energy of all types. Bring that on.
Make sure that energy is available with the idea of the U.S. being an energy superpower. That is the same dynamic we are seeing in Canada as well, creating Canada as an energy superpower, energy of all types, including renewable natural gas. We are optimistic that we will see more supportive programs in Canada. Of course, we just saw in Brazil the recent legislation supporting biomethane to drive a 10% greenhouse gas reduction. Already, that is 1% for next year. That is going to result ultimately in an estimated 20-fold increase in biomethane. Lastly, of course, in Europe, there has been a continued investor enthusiasm for the space. We are doing really well, as I mentioned, tying it back to your other question, seeing the growth of our biogas desulfurization products. We make those in Europe. That is the heart of the market for which we sell it.
We're taking that global. We're seeing supportive legislation and support generally across all our markets.
Great. Thank you, Brad. Thank you, Stephanie. As a reminder, please feel free to submit any questions you have to our investor email address at ir@greenlanerenewables.com. Thank you very much.