Northstar Clean Technologies Inc. (ROOF.V) Q3 FY2025 Earnings Call Transcript & Summary

Excellent. Well, welcome, everybody, to the Q3 2025 Northstar Clean Technologies quarterly update. So we'll go through the quarterly results today that were released this morning and also provide an investor update, normal kind of process that we'll go through. So I'll do the intro. Greg Phaneuf, the CFO, will take us through the financials, and I'll do the investor update. Q&A is always in the corner of your screen that you can put the questions into and Trenton from Kin Communications will help us today. And as always, thanks to Nat for setting this up. So look, I'll give just a quick overview. Financially, kind of a relatively benign quarter. Greg will take us through that. But this is -- as I said, I think at the last call and I said in my presentations recently, like we are at an absolute tipping point for the company. I said it at the presentation that we gave when we opened the site in Calgary, et cetera. So I would almost describe it as this is the time for a new ROOF. And one of the things that I will hopefully give some confidence today is the buyer confidence in our new ROOF. This company is literally right at the tipping point for that happening. So in the investor update, I'll talk about Calgary. I'll talk about Hamilton. I'll talk about US#1. And I'll also -- as well as kind of talking about what we believe we've delivered in 2025, I'll also talk about the vision that I had 4 years ago when I joined when I waved my arms and said this was a $1 billion company. We'll actually describe the pathway to $1 billion. So we actually believe this is a relevant plan that can be delivered: number one, based on what we're seeing in Calgary. -- number two, based on the support that we have in Calgary and the ability for us to rinse and repeat the support structure that we have in every jurisdiction. I mean you've heard me being quoted as saying we want to be the Tim Hortons of asphalt shingle reprocessing. And to do that, you need to be able to build the same facility again and again and again, rinse and repeat. And so we'll show you how we actually believe there is a plan to get this company to $1 billion worth of value. So I'll talk about that at the end. So provide a bit of kind of vision as we head out of 2025. So as always, forward-looking statements on the website, on the presentation that will come out tomorrow, kind of just point you to that. And with that, over to Greg and the financials.

Thanks, Aidan. As Aidan mentioned, Q3 of 2025 was fairly benign from an operational perspective. The quarter did have, as Aidan has alluded to, and we'll speak about in a minute, fairly impactful milestone events. These milestone events provide the foundation to generate sustained operations and ultimately will make their way into quarterly financial results, an event that we at the company and the marketplace are keenly looking forward to. Consistent with prior quarters, the company was able to continue its intake of asphalt shingles and received tipping fees in the amount of $122,000 for the 3 months ended September 30, bringing total tipping revenue to $440,000 for the cumulative 9 months ended September 30, 2025. These 9-month totals are consistent with the prior year year-over-year. Shingle collection did slow somewhat during the quarter due to physical space limitations at the Empower Calgary facility. With the commencement of sustained operations, the stockpile will be brought down, enabling the company to resume meaningful collection programs, inclusive of the newly announced City of Calgary contract, resulting in significantly more revenue per quarter from tipping fees and consistent with our economic modeling. Comprehensive loss for the period equaled $3.9 million compared to $3.2 million loss for the comparable prior period of the company. Significant expenses in the quarter included additional variable costs such as utilities associated with running the Empower Calgary facility on a more sustained basis. The second material difference between Q3 '25 and Q3 '24 was personnel, professional and consulting fees of $1.2 million versus $700,000. Again, additional costs in this area were incurred with increased staff levels, primarily at the Calgary Empower facility, together with nonrecurring personnel expenses. Capital expenditures significantly decreased in the quarter compared to the prior year period as construction activities were predominantly completed in the second quarter of 2025. Capital expenditures of $1.7 million related to capitalizable commission expenses. This compares to $6.5 million for the prior year period, which related to construction activities, as I mentioned. The company exited the quarter with just under $2 million in cash, offset by accounts payable and accrued liabilities of $2.7 million. Included in current liabilities are a number of maturing convertible debentures, all of which are in the money at this point, and we anticipate will be converted to equity prior to maturity. As has been the case over the last several quarters, $95,000 in convertible debentures were, in fact, converted during the quarter. The company also successfully raised $3.4 million in net proceeds during the quarter via a nonbrokered unit financing to bolster working capital reserves. Lastly, and subsequent to the quarter, we announced the attainment of 80 tonnes per day, which under Milestone 3 of the Emission Reduction Alberta's $7.1 million grant will bring in a further approximately $730,000. We expect to receive those funds shortly as the government works through their treasury process. I personally look forward to reporting operational results in the coming quarters. And with that, I'll turn it back over to Aidan. And that's the cash balances. So consistent with the prior quarter, you've seen that slide on the screen.

Excellent. Well, Greg, thanks for that. So investor update. First point is to kind of obviously outline kind of Q3 and what we're doing for the remainder of 2025 and Q1 forward. So the key, of course, was a constructed facility and hitting the 80 tonnes a day from Emissions Reduction Alberta. That obviously coincided with kind of first asphalt or first liquid asphalt production and first pelletized asphalt, as I've said before, and we'll touch again on the Calgary slide. The quality of that asphalt is excellent. We had the limestone patent, which got added, and we also -- and most importantly, which I'll talk about in a minute is the City of Calgary deal. And we'll also outline some of the stuff that was said on the opening of the facility on November 12. And look, for the remainder of this year, the most important thing that we have to do is deliver first product sales and revenue at the Calgary facility in December, and that is the plan. So we want to be coming out of 2025 with revenue coming in from asphalt sales from the facility and continuing that steadily through 2025 and obviously steadily through Q1 as we ramp the facility up. For the other 2 facilities, Hamilton and US#1, I'll give a little bit more detail today on where we are with the development of both of those. But again, ruthless focus is all about delivering revenue from this first facility. So this is a slide, and I've shown this in a couple of presentations. So forgive me if you've seen this before. Our Emissions Reduction Alberta team that came in to review the facility, look at running front to back, et cetera, et cetera, ahead of the 80 tonnes a day, they took the picture on the left-hand side in 2024. And they took it in October 2024. And now the one on the right-hand side is the built facility in October 2025. So this isn't about aren't we brilliant, pat on the back, et cetera, et cetera. But this is just a matter of fact of within the year, we have literally built, commissioned and started operating the facility on the right-hand side. So as a matter of course, we've talked about it before, the honesty of was this facility delayed? Would I have liked it to have been built faster and operating sooner? For sure. But as a business, the tipping point is the picture on the right-hand side, which actually shows a facility constructed. So Calgary, fully engineered, fully constructed, fully commissioned, hit the Alberta ERA milestone. And one of the things that's really important about Calgary is not only is it the first of its kind, not only do we want to learn from it as we go for the rinse and repeat, but now we have the municipality on our side so closely that we have a 5-year agreement for all of the supply that goes to Calgary's landfills to come to our facility. So if you think about that and you think about emissions reduction in Alberta, and you'll hear Justin Reimer from Emissions Reduction Alberta talk in a little bit here. But if you think about the nondilutive support we got from the province, and you think about the capacity of the Calgary facility and the dollars that we'll produce. This is the framework for our rinse and repeat. So when I talk later about how do we actually deliver a $1 billion company, it's exactly that. It's municipal support, it's federal, provincial and state support and it's the ability to get feedstock fed into it and run through it in an effective way. So Natalie, could you play the video? So we're not seeing any video, Nat. [Presentation]

Thanks, Nat. Okay. Let me just get our slides back again here. So when we send the link to this for the presentation, we will also send a link to that video link again. So that is the provincial government talking about the success of the Northstar project, and it's the MLA for the region. So it's the government support. And again, this is the rinse and repeat of our success in Calgary that we want to repeat elsewhere. So Hamilton, let's talk about that. There seemed to be a little bit of confusion in my -- in the call the last time, and I apologize for causing any confusion about putting doubt with respect to the site in Hamilton at HOPA. So as you know, Hamilton Port Authority is where we have the initial draft lease agreement, et cetera. And so what they needed to do was as they looked at utilities, they needed to land the exact -- sorry, they needed to finalize the exact plot. You can't do any permitting until you have the exact plot. So as we came out of the summer, we talked to the ministry and the ministry said, yes, you need to do -- you for the site need to do an air ECA and a waste ECA. But to do an air permit, what you have to do is you have to have -- it has to be at your boundary line of your facility. So that is, when I say specific site finalized, that's what we have done with HOPA. And now we can essentially start the permitting process. We're progressing one federal and one provincial nondilutive funding options. Applications will be submitted in Q1, and we've identified those and started to engage with both of those funds. And of course, as part of all of that, we've commenced local engagement with the local council there as well to engage them in the federal and provincial nondilutive funding options. So good progress in Hamilton, permitting starting as we move into December here. And essentially the same in the U.S. So we've identified the state, we've identified the city. We've engaged with the state environmental teams. We understand exactly what permitting needs to be done. The consultants are ready to go as they are in Hamilton. So the only thing that we need to do in for US#1 is finalize the negotiation on the site. Now this has been a bit frustrating this year. We've had one site that was close to being concluded in negotiations, which we didn't conclude. And -- but this one now, we expect to have it concluded by the end of the year. And then that will, again, same thing, prompt the ability for us to progress the permitting. We have engaged, again, similar to Hamilton, we have engaged with both federal agencies in the U.S. and with state agencies in the U.S., again, for nondilutive funding options, and those look promising in the same way that the Hamilton site does. So look, this, again, is not a, hey, we want a pat on the back for building this facility. But this is just a bit of a list of what we've delivered through 2025. And from a shareholder perspective, what we've continued to say and to do is to deliver along these elements of strategic relationships funding and kind of developing the technology. So as you know, we've had huge ongoing support from suppliers and offtakers. The R&D that TAMKO and McAsphalt have done has delivered a quality at the back end of this facility that is better than we expected, which is fantastic. Ongoing engagement on feedstock supply and now a 5-year waste shingle supply agreement with the city of Calgary. As I talked about, upcoming on the Hamilton side and the U.S. expansion continues to gather pace. We got 5.2 million of the $7.1 million from ERA. You heard what Justin Reimer said about the support of the ERA Board and the ERA management, which has been fantastic. We've built Calgary. So now as I said, the December -- as we move into December here, what we expect to see is the first revenue from the first-ever facility that Northstar has constructed, and we expect that to see that in December and the asphalt sales occur. But the production as we've done, we've hit the ERA target of 80 tonnes. We've demonstrated that the facility can do that. And some IP in terms of the limestone patent and limestone developed as a process, but most important of all of these from a shareholder perspective is the quality of the asphalt that's coming out of this facility. So that's something that you guys can be happy of with respect to what we have actually delivered. So let's talk about the road map to $1 billion. So we believe we have a clear path to this. So we believe that if we spend $25 million and build a facility that can process 80,000 tonnes a year and it delivers in the same way that we expect Calgary to, we should be seeing an EBITDA of approximately $10 million come out of that facility per year. Now again, if you take a conservative waste-to-value EV to EBITDA multiple and you use 10, that will give you a value per plant of around $100 million. So the key thing then is to get to $1 billion, you have to build 10 facilities. So this -- when I joined 4 years ago, I arm waved at the figure in the bottom right. So I arm waived to say, I think this is a $1 billion company. Now we actually have a capital EBITDA waste-to-value multiple and a number of facilities that demonstrates exactly what that is. And so we've talked about it before. We have Calgary, we have Hamilton. We have US#1, we have the retrofit of Vancouver as part of that plan. And we have the first 4 facilities in the U.S. going to TAMCO. So once US#1 is built, we still have 3 more facilities that literally have got offtake agreements in place. So as you look at that math, that gives you -- that essentially gives you 4 plants right in with Calgary, Hamilton, US#1 in Vancouver, 3 to follow on to give you 7 and literally, it's another 3. As we've always said or as I had originally said, our original view was the decision was based on asphalt pricing and tipping fees. Now as we know, one of the most important things is the 80,000 tonnes a year supply into the plant. And if you look at the facilities that TAMKO have near Atlanta, Kansas City, Dallas, et cetera, then you can easily see that those could be 80,000 tonne facilities. So we have a clear plan, we believe, to hit that. And although it's a bit kind of end of the year Christmas message visionary, it at least has some solid steps that we think that we will be able to deliver a $1 billion company, because that's the legacy that we think we have. And as we produce in Calgary and have the first revenue through December and into 2026, we think that's what -- that's -- we think that's how we are going to deliver a new ROOF to the shareholders on this call. Okay. Trenton, that's my finish with my new ROOF, and let's see what the questions are.

Great. Sounds good. Thank you, Aidan. What are the plans for the Delta site over the next 12 months?

Yes. I mean, so Delta, as you know, we've done the R&D on it. And so the plans are all hinge around the offtake. So we are developing -- sorry, we are engaged in offtake discussions around Delta and the kind of landing those will then influence the timing of actual construction of Delta. That's our current plan. We still believe that Vancouver is a great location. We have a fantastic relationship with the city of Vancouver. And they are keen to support us in terms of shingle diversion as well. So very similar to the city of Calgary. So we know we have feedstock access. And so the critical point, of course, as I've said many times with all of these facilities, critical to us is not only feedstock, but also offtake. Now as we've talked about before, Delta has incredible proximity to the Tsawwassen export terminal. And so with the advent of us having pelletization, that can give us that export option. And so that is part of the market that we are examining as well is not only the Western -- obviously, the West Coast market, but also the international market. So those are 2 things that we're looking at with respect to offtake. But the development plan for that site will be determined by those negotiations.

Excellent. Thank you. With respect to financing the next few sites, do you expect it to follow the same template as Calgary with the 3 legs?

Yes, totally. I mean, if you look at -- and we didn't talk about it today, but if you look at, obviously, we have a letter of interest for BDC for Hamilton. We did the EDC announcement for US#1 and the follow-on facilities in the U.S. So we have clear interest in debt from those guys. As I said, again, on Hamilton, we have both -- we've got -- we've engaged both provincially and federally for Hamilton, and we've done exactly the same for US#1 at the state and the federal level. So I think it's an exact rinse and repeat model that involves government sponsorship or government funding, debt funding and then equity, either at the asset level or at the corporate level. And of course, the other thing about strategic equity is if you're -- so of the people that we've been talking to on the strategic equity side, one of the clear demonstration points, and it's a clear demonstration point for a municipality. It's a clear demonstration point for a state funder or a provincial funder or an offtaker is Calgary demonstrating that it's operating and producing revenue and producing product. So coming out of Q1, we want to be able to clearly point at the asset and go, this is what this is delivering because the tip-on effect of that, of course, for everything, whether you're sitting in a mayor's office or you're sitting in a bank or you're sitting in an offtaker or you're sitting in a single provider, you want to see that Calgary is delivering what we expect it to deliver. So all of that becomes a lot easier as we go through Q1.

Great. I have a sort of more operational question. With the asphalt that's come at the back end since production started, where has that been going?

So storage and pellets, and that's being held internally at site. And so now it's time to work with asphalt in delivering that to them and to the market, and we're working on that as we speak.

Excellent. I have a few questions here. I'm just going to try to combine them thematically. Through next year, do you anticipate developing multiple sites or at least having the next 2 or 3 in progress?

Yes. I mean, absolutely, I think we absolutely have to do that. I mean as we've always said, the constraint is not the speed of build or commissioning once we're kind of going to rinse and repeat these. But the constraint is the identifying the city, identifying the site, starting the permitting process, engaging for supply. offtake, of course, for the next 3 U.S. sites is largely with TAMKO. So no issue there. But yes, so we should be leaving 2026 with the next 3 sites identified for sure.

Great. And just to close it off here, unless anyone else has any other questions. With the company reaching this sort of next stage, like you mentioned, with a new ROOF, how should investors think about risk?

Well, I mean, I've often said that the steps that you take when you're developing a technology are kind of the 3 or 4 steps. So the first thing is you develop the technology in your backyard or your garage or whatever, and that's the kind of first development of the technology. Then the next step is to develop the pilot plant. And the pilot plant often needs capital, needs fundraising no matter what. And some -- as we know, some emerging technologies, that is a significant amount of capital. For us, it was relatively -- wasn't a huge amount of capital. But the biggest step is to take it from pilot to commercial. That's always the step that is the most difficult, cost the most money, has the most risk of delay, has the most risk of overrun until you get to the point where that facility actually operates and produces at the back end. So if you just think about the technology and you think about the quality of the product and the asphalt we're delivering out of the back end, it's superior to what we actually thought. It's great quality asphalt. So that risk, in my opinion, of the science experiment, my arm wave be, hey, this is what we can deliver over the last 4 years. I think that risk is negligible now. Now are there operational improvements? For sure. Are there improvements to the engineering and the design of the facility for the next plant? For sure. Did we learn stuff during construction and commissioning and operation? For sure. Will those be integrated into the next design? For sure. So the next design, the technology risk is 0 because we've kind of turned the hard yards to get to this point. So I think if you're a shareholder in ROOF now, I think the technology risk is minimal. And it's all about how fast can they roll these out. So if you believe in the vision of we can roll out 10 plants, and you do -- you take the conservative EBITDA, then the $1 billion vision is not arm wave anymore. It's actually realizable, and there are steps that we can clearly define on how to do it. 80,000 tonne facility -- sorry, 80,000 tonne a year facility, generating the margins that we expected to, to deliver an EBITDA of 10 -- x10 to get to the $100 million per plant, and we need to build 10 of them. So I think the new ROOF, I mean, I wouldn't say the ROOF is now designed, right? It's been built. And it's nice in France banking new asphalt, nice and shiny, it's made through the asphalt that we reprocessed and we built a new ROOF. And now I would say you can live in that house very comfortably, and it is -- I think the risk is minimal.

Excellent. Thank you, Aidan. That is it for questions. So I'll flip it back to you for closing comments.

Good. Well, listen, I think the last question was a lovely serve ball that I could address. Look, I mean, if -- again, you know that my style is pretty straightforward in terms of honesty. We had the site opening, demonstrating huge support from the city, huge support from the province, huge support from the MLA and the government of Alberta kind of demonstrating how we can do this really well with municipalities, provinces and states and governments. Was it later than I wanted it to be? For sure. Is first kind of commercial sales later than I wanted it to be? For sure. Did we learn a lot of lessons to get here? For sure. But I truly believe the answer to the question of risk for shareholders that this is literally how fast can we build the Tim Hortons of asphalt shingle recycling or asphalt shingle reprocessing across North America. That's it. How fast can we build these and how can we, in all of the cities that we go to have the same success that we've had in -- with Calgary, with the government and the municipality and the province and how do we do that most effectively. That's the challenge ahead, and I think that's a great challenge to have. I think the risk of that is low because I think we will be able to point to an operating facility and bring mayors of all the cities across North America to our facility in Calgary and show high-quality product coming out the back end. So I think as our kind of new route for Christmas, as we come out of 2025 and into 2026, I have nothing but confidence in terms of what we're going to deliver for these shareholders.

Okay. Thank you.