Anaergia Inc. (ANRG) Earnings Call Transcript & Summary

Thank you. Hello everyone. Thank you for joining us and welcome to the Energia second quarter 2026 conference call and webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. now hand the conference over to Darlene Webb with Investor Relations. Darlene, please go ahead.

Thank you very much, Operator, and good morning, everyone. On today's call, we'll be discussing Anergius earnings for the second quarter of 2026, which ended June 30, 2026. I am joined this morning by Mr. Asaf An, Energy's Chief Executive Officer, Mr. Greg Wolf, Energy's Chief Financial Officer, and Dr. Yaniv Sherson, Energy's Chief Operating Officer. Before beginning our formal remarks, we would like to caution listeners regarding forward-looking information and note the company's use of non-GAAP measures. Listeners are reminded, as always, 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. Energia does not undertake to update any forward-looking statements except as may be required by applicable laws. Listeners are urged to view the full discussion of risk factors in the company's prospectus filed with Canadian securities regulators. And with that, I will turn the call over to Asaf. Thank you, Darlene.

Good morning, everyone. It's good to be back here with you. The trajectory I described three months ago continues. Every pillar of the business is delivering. Revenue grew 98% year over year to $63.9 million. Gross profit grew 38% year over year. Adjusted EBITDA was positive for the fourth quarter in a row. Revenue backlog stands at $275 million, up from $257 million at year end. I am pleased with these Q2 results. And I'm also as clear on where the work still lies ahead. continuing to convert our revenue backlog into revenue, continuing to ramp our platform assets to their full potential, and continuing to run Energia with the operational discipline that defined my approach. Greg, we'll walk you through the financial details shortly. Two development disorder that stands out. First, our SoCal Biomethane Facility began delivering on the California SB1440 Utility Gas Procurement Program. We are the first project to deliver gas under that program. Second, we signed a $58 million contract with Eugenics Fuels. Eugenics is a joint venture backed by Amaresco and HACI. Through their joint venture, two public companies chose our technology for their first project in agricultural R&G. That kind of a choice is not made lightly. And I am proud of what it says about an AGEA. Yaniv will walk you through the full operational picture. The border environment remains supportive. In our largest markets, government programs continue to drive long-term demand for what we do. partners like eugenics are choosing us for the first time and it existing partners like Vanguard are choosing us again. for the part with the actual numbers. Greg, over to you. Greg Scarlatoiu, Chief Executive Officer, Asaf & Good Morning, everyone. Let me.

take you through our financial results for the three months ended June 30th, 2026. Revenue for Q2 2026 was 63.9 million, an increase of 98.1% or 31.7 million compared to 32.3 million in Q2 2025. This revenue growth was primarily driven by increased capital sales project execution in Italy and North America. On a year-to-date basis, revenue increased 109% to $119.1 million from $57.1 million in the first half of 2025, reflecting the sustained ramp-up of capital sale project execution across both quarters. Gross profit for Q2 2026 was 14.5 million, an increase of 38.2 percent or 4 million from 10.5 million in Q2 2025. On a year-to-date basis, gross profit increased 71 percent to 27.2 million from 15.9 million driven by the same capital sales led revenue growth. Gross margin in Q2 was 22.7% and year to date was 22.8%, which is below our expectations, mostly due to our Rhode Island bioenergy facility, one of our build-own-operate assets, which continues to increase its renewable natural gas production at a steady rate. excluding this asset's approximate $1.8 million gross margin loss in Q2 2026. Our gross margins would have been approximately 2.9 percentage points higher, and our adjusted EBITDA would have improved to approximately 3.7 million. Year-to-date, our gross margin excluding this asset would have also improved by 3.2 percentage points from 22.8 percent to 26 percent. An adjusted EBITDA would have been higher by Although we see steady operational improvements at the facility, we are exploring other opportunities for this asset given its continued underperformance. SG&A expense for Q2, 2026 were 15.2 million compared to 14.3 million in Q2, 2025. Q2 SG&A reflects higher legal and tax service fees in the period. The tax service fees relate mostly to tax strategy initiatives across the company, exploring ways to reduce our overall tax costs as we move forward as a profitable entity. On a year-to-date basis, SG&A of 29.3 million was lower by 6.9% or 2.2 million compared to 31.5 million in the same period last year. We continue to run the business with discipline while supporting our growth initiatives. Turning to the bottom line, net loss for Q2 2026 was 2.1 million compared to a net loss of 9.5 million in Q2 2025, an improvement of 78% year over year. on a year-to-date basis net loss was 6.5 million compared to a net loss of 15.4 million in the same period last year an improvement of 58 percent driven by higher revenue gross profit expansion and discipline cost control Now moving to adjusted EBITDA. Adjusted EBITDA for Q2 2026 was positive $1.9 million compared to a loss of $2.2 million in Q2 2025. That is an improvement of $4.1 million or 187% year over year. On a year-over-year basis, adjusted EBITDA was positive 3 million, an improvement of 9.2 million, or 149%, compared to a loss of 6.2 million in the same period last year, or This reflects the consistency of our positive trajectory across the first half of the year. This is the fourth consecutive quarter of positive adjusted EBITDA, and it reflects the consistency we have been building towards. On a trailing 12-month basis, we have achieved adjusted EBITDA of $9.7 million. Turning to revenue backlog, during the second quarter, we signed 66 million in new contract awards in our key markets, including our 58 million contract with Neogenics Fuels and our 8 million contract with Vanguard Renewables. contract bookings net of revenue we recognize from revenue backlog during the quarter increased our revenue backlog to $274.9 million at June 30, 2026. This is an increase of 3.8 percent from Q1 2026 and 7.2 percent from $256 million at year-end 2025. As a reminder, our revenue backlog rule is to include only signed contract work in our capital sales segment as of the reporting date and to count conservatively only three years of long-term O&M contracts, even though those contracts are typically five to 15 years in duration. Beyond our existing revenue backlog, we continue to pursue a large pipeline of capital sales and other opportunities across all key markets. During Q2, we secured a $20 million revolving credit line with National Bank of Canada. This new credit facility provides Energia with enhanced liquidity and financial flexibility to help support our continued growth plans and project execution. In addition, we have the ability to increase the credit facility another 10 million to the accordion feature this three-year credit facility gives us the financial flexibility to continue building our long-term growth plans and reflects the market's competence in our vision to deliver complex infrastructure projects across multiple continents In summary, Q2 marked another quarter of strong execution and continued financial momentum. Revenue nearly doubled year over year, adjusted EBITDA was positive for the fourth consecutive quarter, revenue backlog continued to expand, and we strengthened our financial flexibility with the new credit facility. executing with discipline and building further financial strength into every quarter. With that, I'll turn it over to Yaniv.

Thank you, Greg. Good morning, everyone. I will walk you through the operational picture for Q2 and how our strategy is delivering in the field. Italy remains our largest market and a strong growth engine. Revenue from Italy in Q2 was 29.8 million, a 370% increase over Q2 from 2025, driven by expanded execution across our Italian project portfolio. Demand across the Italian market remains strong, supported by Italy's National Recovery and Resilience Plan, which backs long-term RNG incentives and capital subsidies on projects. We are watching policy development closely on the next generation of the NRRP incentive program. We see it as a future growth driver of multi-project platform sales. In Spain, execution is underway on previously announced projects with gas and waste companies, Nordic Gas and Prezero. These anchor projects position us well for future work in Spain's emerging RNG market. In North America, major news on the capital sales and asset front propelling the business forward. On the capital front, new contracts with strong balance sheet backed customers, Neogenics and Vanguard Renewables. In May, we entered into a 58 million contract with Neogenics Fuels. Neogenics is a joint venture between Amoresco and Hasi Capital. Under this contract, we are supplying anaerobic digestion technology to large scale agricultural facility in Nebraska. Notably, this is the first project in the Neogenics pipeline. In April, we signed an 8 million contract with Vanguard Renewables for our fourth technology deployment with this customer. The facilities in Minnesota will process food, beverage, and agricultural waste into renewable natural gas. This repeat supply to Vanguard further validates our technology solutions and execution capability. On the asset front, commencement of RNG supply under SB 1440 was the major news. In June, SoCalBioMethane began deliveries of renewable natural gas to Southwest Gas Corporation under California's Senate Bill 1440 Biomethane Procurement Program. This is the first project to deliver RNG to a California utility under this program. Notably, the SB1440 offtake structure supports long-term profitability of the facility and a major growth engine in the state for additional projects. The Charlotte facility remains idled while we assess the best path forward. The Rhode Island Bio-NG facility continues to operate, producing RNG and is gradually improving while we address technical issues. As Greg noted, although we see steady operational improvements at the facility, we're also exploring other options best for the asset, given its continued underperformance. our Mojave and Escondido assets continue to perform operating stable and profitably. This quarter underscore is a key trend, sustained capability to execute disciplined quarter-over-quarter and trajectory of increasingly large integrated technology capital sales. Repeat customers with multi-project portfolios across Europe and North America validate our capability to add value and support our expanding business. And in June, our asset platform transitioned into commercial delivery under SB 1440, as our Soka Ba Methane facility became the first project to supply California utility under the largest RNG procurement mandate in North America. Globally, regulatory tailwinds continue to build with long-term incentives, driving project investment from our customers, Italy's National Recovery and Resilience Plan, the UK's Green Gas Support Scheme, Canada's Clean Fuel Regulation, and now California's SB 1440. Each creates structural multi-year demand for this kind of infrastructure. infrastructure that we deliver. Our platform is growing in customer base and contract value consistently. With that, I'll turn it back to Asaf.

Thank you, Aniv. Thank you, Greg. At the top of the call, I said the trajectory I described three months ago continues. Our Q2 results show this. Fourth consecutive quarter of positive adjusted EBITDA. Revenue nearly doubled year over year. revenue backlog is building, first commercial delivery under SB 1440 and customers both new and returning are choosing Energia. I want to speak briefly to what comes next. We will continue to execute and we will continue to compete for each project. Our technology, our track record and the way we deliver give us both the strength to compete over the long term and the ability to grow with our markets. to our shareholders. Thank you for your continued confidence to our employees across every region. Thank you for the work behind these results. And for our partners and our customers, thank you for the trust you continue to place in us every day. We have the people, the technology, and the strategy to build on our global leadership. I look forward to updating you next quarter. Operator.

We can now open the call for questions. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from Baltej Sidhu with the National Bank of Canada.

Your line is now open. Please go ahead. Hey, good morning everyone and congratulations on the quarter. I just have a few questions. The first relating to M&A, we're seeing more and more M&A relative to the storage as it relates to biomethane and biogas facilities. Recently BP is now looking to offload our KIA energy as well. So I just wanted to get your sense of what are you seeing in the marketplace? Are there rooms to kind of look to add assets at favorable costs and IRRs? How are you looking at valuation and how does that stack up with what you're seeing?.

But as you know that we are always scanning the market and we are looking for everything that we have in our markets. Many interesting things are happening across the regions. As you know, we are a global company and we are looking into many different possibilities. But at the moment, there is nothing to say more on this point.

Thank you for that. And then just to follow up on the recent Australia announcement, you know, that's new geography for you. Could you just give us a sense of the competitive dynamics in Australia and New Zealand with that regard and how big of a market could this become? And just as a follow up to that, having other conversations with other parties that could be looking to use the technology in similar spheres?.

entered Australia because we understood the market and the market is very big. We see Australia as what Europe used to be 15 years ago. This is the reason that we are there. As you know, it took us less than a year to sign our first contract and we are seeing vast majority of opportunities that we are, you know,.

know, going after at the moment. There is one last one for me is just on our idea. Could you, I believe that we've stated prior that we expect it to be break even through through the back half of the year and are wrapping up to 80% utilization in the second half of the year, you know, it's remaining a drag on. Could you just, and you pointed to a few items on our idea, could you just help us understand kind of where we stand today and the pathway towards breakeven and if through the year end is still a good guide?.

We continue to deal with technical issues at the site and the site is improving year over year. However, at this point we're unable to give any predictions or guidance as to timeline for breakeven. mentioned, we're exploring options that are best suited for the asset. It has underperformed, although the performance has been improving year over year.

Thanks. Just with the CFR, is the 30% uptick and offtake gas pricing, is that still a good approximation, just given the CI score that we have?.

Yes, that's that's a order of magnitude. Correct. And notably, though, you know, carbon prices are variable. So the gas price will be shifting based on the credit price at any given time.

Thank you for taking my questions. Your next question is from Craig Irwin with Roth Capital Partners. Your line is now open. Please go ahead.

Hey, good morning guys. It's Andrew for Craig and congrats on the really strong quarter. First one for me, congrats on the progress for delivering. under SB 1440, can you kind of talk about how the mandate may, you know, drive future demand in California and opportunities for similar projects?.