Progressive Planet Solutions Inc. (PLAN) Earnings Call Transcript & Summary

Thanks, everyone, for joining us today for Progressive Planet's Q4 conference call. We are taking questions from the audience. So viewers, please, we encourage questions from the audience, please type them into the Q&A. Try to keep your questions clean and tight and clear. If it's long and rambling, a good chance we may not ask it. So I will start the official opening comments now. Good afternoon, everyone, and welcome to Progressive Planet's Fiscal Q4 2026 Earnings Call for the period ended April 30, 2026. The financial statements and MD&A have been filed and can be accessed through the SEDAR website. Today is September 9. CEO, Stephen Harpur; and Interim CFO, Kyle Dickson, are here and will present the company's financial results and provide a business update followed by a Q&A session. Investors are encouraged to submit their questions via the Q&A box and they will be addressed at the end of the session. I would remind everyone that certain statements made today may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors. For a complete description of the risks and uncertainties facing the company, please refer to the MD&A and other continuous disclosure filings, which are available on the SEDAR website. And now I turn it over to Stephen Harpur.

Thank you. Thank you, Martin. Can you see the presentation here, Martin?

It all looks good.

And those of you who have been here before, you'll see a new face. Kyle is not new to our company. Most recently before becoming Interim CFO, was our VP of Finance for our operating sub, Progressive Planet Products, and Kyle is a CPA like myself. Our CFO, Chris Halsey-Brandt, had an incident where he's required to have a little bit of rest from his doctors. We expect him to be back shortly. So he's not gone permanently, just a little bit of rest and we look forward to having him back shortly. And Kyle will then revert back to his VP Finance, but he stepped in on short notice while Chris is getting some rest to take on the Interim CFO for this short period of time. And Kyle, thank you very much for that. So without any further ado, I'm going to start here. Martin already read some legally, so I'm not going to read it again. So Progressive Planet at a glance. I had a family office, the gentleman running a family office, all of his own family's money, asked me in the last week, describe your company at a very high level. I don't want any high-tech, any sort of detail, describe it in lay terms. And so it made me think. And so this is really a summary of Progressive Planet at a glance. Profitable, vertically integrated, CleanTech manufacturer. We focus on silicate-based products, cash flow funds our innovation pipeline. So we're not constantly diluting for new products, not diluting our shareholders. That's very important. We haven't done an equity financing in years. So we also have patent pending solutions [ point ] to disrupt the cement industry. We own our mineral assets as a key advantage. The only exception is the material that we take from Eastern Oregon for the Pure DE 3 SKUs. That is not our material. We have -- this is a new one. And as I got to thinking, where is the value of Progressive Plan? Well, we have decades of selling branded products that are trusted brands and people just repeatedly buy these same products. Stall Dry, Activated Barn Fresh, Red Lake Earth, WunderCat, Fresh Coop, Fresh Coop Dust Bath so -- CanDry. And most recently, we just launched a private label version of CanDry called [ ProDry ]. So we've just launched this in the Toronto area, very excited. And of course, we're actively seeking accretive opportunities. We have a world-class team of welders, of millwrights, of mechanical engineers, of operational plant operators and of course, our financial and our management team and our sales team. So we're looking to take advantage of all of that expertise in-house to grow the business. Financial position. We had a record Q4 revenue. We still have more than $3 million available in unused credit facilities even after the $6.7 million that we spent this year on capital assets. We still have $2.2 million in cash as of April 30. No further large onetime slotting fees budgeted. We did this once. We'll talk about it in a future slide here. We're very, very happy with the results of that. And of course, we did have 2 major onetime costs in the year. The 1 being the slotting fee that I just referenced; and secondly, we wrote down an inactive mineral property. Since I got involved in Progressive Planet in 2018, we had spent about $8,000 on that from 2018 to 2026. We wrote it down, but it was carried on the books and historical value of over $1.2 million. So those were the 2 major items that really affected our profitability. The slotting fee. I've never talked about this until right now, but I want to actually put some numbers out there. So when we made this investment, of course, we did not have the benefit of [ 2020 ] hindsight, we now do. It was a deliberate investment to double our shelf presence with a top U.S. retail partner. So we went from 3 SKUs in 2,434 stores to 6. We made a major investment to procure long-term shelf space. The slotting fee was approximately CAD 500,000. So the first products for Pure DE, and you'll see the 3 products on the left, the 20-pound bag, the puffer bottle and the jug. Those 3, we started selling the November 1. We've sold over CAD 1.8 million closer to CAD 1.9 million in the 10-month period from November 1, 2025 through to the last week, we've sold over $1.8 million to $1.9 million. I am not going to get into our gross margins. We don't talk about gross margins on individual products for competitive reasons. But we paid off the $500,000 fee already in less than a year, and we are just really excited about the future growth of this line of products. So anyone who's dug deep into our financials, realize we spent a lot of money this year to essentially provide us with long-term investments. And how does that break out? Well, the $6.74 million, $3.76 million of that was for the PozGlass pilot plant. That was a major building extension, equipment. It was offset by a grant income. We do not report the grant income in our revenue. It is reported down further on the income statement. So when we talk about $23.2 million in revenue that did not -- that does not include our grant income that's reported separately. And then $2.71 million in production equipment. So that was the new Valve Pack line, the new robotic palletizer that does 2 lines at once and now he's doing 2 lines at once. And then we had about $0.25 million, primarily Alberta lab equipment and lab lease capitalization. I think there's real value for people to understand. And I did say in the news release that was a -- company is our audit financials that we intended to continue to invest for the next fiscal year. But I wanted to define 4 different projects. These are the 4 major capital projects underway to be finished in the current fiscal year. PozGlass Phase 2, that will be finishing the equipment installation and commissioning to actually make PozGlass supplementing cementing powder. We intend to start making CanBlast. We've been selling CanBlast for almost 20 years, but it's been made by the only other company in BC that is approved by Recycle BC to accept post-consumer glass. But we will be making our own CanBlast, we own that brand. And again, 1 of our long-term brands. Lightweight cat litter. We fabricated a new piece of equipment, it's quite vague. It's about 50 feet long, about 12 -- about 10 feet wide and about 8 feet high. And this will be installed in place before December 31. We are making lightweight cat litter now. But with the installation of this new piece of equipment, we will make it faster and more efficiently. The automated Valve Pack line, this came from Spain. We've had it for several months, but we're expected to install that by February 28, 2027. And then our fine grinding line, which allowed -- which increases our capacity to make fine powders by a factor of about 10, expected completion by February 28. So major civil work underway right now. We poured a big pad for the new silo to receive that product last week. Big investment. Big 1 in [ rebar ], a 16-inch on center. Major civil works well underway for that project. So those are the 4 major capital projects. But that's it for now. So as I -- again, I referenced in our year-end news release, these 4 projects, so it is no secret that Absorbent spent minimally on infrastructure and equipment for the decade before. It was acquired by Progressive Planet on February 18, 2022. We've made the increased capacity and site infrastructure requiring investments. These ones are either they've been completed or they're part of the 4 projects, and I just gave you the completion date. So in each case of these 4 projects that will be done before the end of our current fiscal year. So the current capital program is committed, Board approved and on track for completion this fiscal year. Any future capital allocation will shift to growth and return-driven opportunities as demand supports [ them ]. So we're approached to do a co-manufacturing by another entity, as an example, we would make an investment decisions looking at the return on investment. But for now, the -- we do not have any other major capital programs planned beyond the 4 that we've just outlined in the last slide. PozGlass pilot plant. Commissioning is nearly done. For those of you who watch our videos and see what I post on LinkedIn and what Progressive Planet post on LinkedIn. We received a full 53-foot [ extractor freighter ] of glass about 2 weeks ago, I took video of same. We processed about 30 tons during commissioning. We are waiting. We expect to receive next week, the final piece of equipment to bag our CanBlast. So right now, we are capable of bulking it into one-ton valve packs, which is 1 form of which large consumers of this product do receive it. But we've been selling it in 50-pound bags for about 20 years, and we will start making those on our own in October of 2026. And as I referenced on Phase 2, we expect to be commissioned on making our PozGlass cement powder by December 31 or the last day of the calendar year, we expect to be running by then. So I'm going to pass over to Kyle. Kyle is very much -- well before he accepted the interim CFO, Kyle is our lead on all things tariffs. And I'm going to hand it over to Kyle to go over some of our financial metrics and talk about tariffs and then Kyle will hand back to me to close the presentation before we go on to Q&A. But Kyle just let me know when you want me to flip to the next slide.

Thank you, Steve. As discussed, this is a hot topic right now with where tariffs is and tariff exposure. We're speaking on September 9. So anyway, just following this [ node ]. This could change as of September 10, but this is where things stand today. Progressive Planet is not currently exposed to tariffs. What is covered currently here, the main categories of motor vehicles, alcoholic beverages and dairy. It gets much more expansive under those categories, including wood and plywood, furniture, textiles, plastics and papers with 50% tariffs even if you're a U.S. MCA qualifying good. And as of yesterday, we saw potential outright import bans on certain goods in the United States. For us as a company, we are not impacted. None of our exports and our codes hit any of the [ Amex ] lists, and we currently are not impacted by tariffs as well as the counter tariffs put on by the Canadian government that went into effect yesterday. A very minimal impact on our operations due to the fact the majority of our inputs come from within BC and Canada. As Steve discussed, we have -- we own our mineral assets. It allows us to have a lot of control throughout the process and on our costs. But as we know, this environment is very fluid and we're monitoring it daily if there are changes. But for now and for the historical path of the last year, we've been fortunate not to be affected. Now on to the financial performance. If you've been listening to Steve talk over the years, you've heard a lot of talk about growth and need for investment in things like the fine grinding mill. If you're just reviewing the financials, you may not see that growth over the past few years and it's been still this year. We've been often around that $19.5 million mark, but underneath, we've seen a loss of a large retailer Stephen's discussed in the past, a loss of access to our [ White ] DE in Oregon, which we gain access to now Pure DE so now this is the first year, I think if you're reviewing just at a high level, you can see the growth occurring, which is going from $19.5 million to $23.2 million in revenue or about an 18% growth rate. And you can see our quarters last year other than Q2, we were able to improve our revenue quarter-over-quarter due to the fact that about 60% of our sales, [ only ] in the U.S., and that's almost exclusively agriculture. We do have a bit of seasonality in our -- are trending, which is why you see our Q2 was down a little bit. There's things we can't control, such as just weather and ordering patterns, but overall, the trending was up year-over-year. Now going into some of the key measures from last year, which, again, overall, you look like we're mostly down in the gross profit. And there's, as Steve discussed, there's been a few key metrics to that overall with big ones being the $1.2 million write-off [ on that one ] asset, what was how historical carrying value as well as the about $500,000 slotting fee which reduced the income of the company overall, the net income down. We're talking about $1.7 million. On the adjusted EBITDA portion, which accounts for things like the Z1 write-off and why we're still down, part of that is due to the amount we've invested in our R&D for the pilot plant to very high standards to capitalize all of the pilot plant costs. So we've chosen to [ expense ] a lot of that [ as is ] investment into PozGlass and net of grants revenue, that's about $660,000 year-over-year compared to last year. So that's where you're seeing some of the decreases. But again, these are investments in the future, investments in Pure DE and PozGlass, we're seeing the gross profit overall increase. And we hope both that these investments, we will see the dividends going forward.

So I'm going to thank you, Kyle, very much. Share structure, 110.8 million, no warrants, options of just under 6 million for a total of just under 117 million shares diluted. Investment highlights, [ probable ] vertically integrated CleanTech manufacturer. And insight to the major CapEx as outlined in this presentation, robust cash flow funds the innovation pipeline, [ clean cap table ]. Patent pending solutions point to disrupt the cement industry. We own the majority of our mineral assets, and we've got a disciplined world-class team that just gets better every year. It's a better team we have this year than it was a year ago. And that is it for the presentation. Martin, if you want to go ahead. And any of the difficult questions, can you please give them the Kyle, I'll take the easy ones.

You got it. How much of the $2.07 million of fiscal 2026 selling expenses was the onetime slotting fee?

About 25%, about $0.5 million.

The gross margins on the 3 new SKUs and the licensed lightweight cat litter carry, how are they relative to the 35.8% company average gross margin?

I'll answer that, Kyle. As much as investors want to know about individual margins of product categories, we've made a business decision that we will not share our margins other than our overall merchant for competitive reasons. We do not want our competitors to know what we make in a given product category. So I respectfully won't answer questions on individual margins for competitive reasons.

What grant income should we model for fiscal 2027 and 2028. And once the pilot plant is in service, what annual depreciation would add to the cost of sales?

It's for you, Kyle.

For the grant income, we don't want to give guidance on that at this moment. As far as for the depreciation, that's a great question. For the pilot plant itself, the capital equipment that we're capitalizing, will depreciate over the license of projects, which will end August 2028. That will show up not in cost of sales, but probably as a separate line under R&D since it's such a material value that will be probably about $600,000 a year. As far as the cost of sales of the investment on the production equipment, you will likely see that this year not depreciate until Q3, Q4, as Steve noted on the time line for the [ PPE being ] equipment, our PPE being finished. We won't appreciate so they're ready for us. So you'll see probably minimal uptick in 2027 fiscal year, with the year after, you'll start to see that as 10% decline in balance. As we've noted, the FortisBC grant for 1 of those projects, the fine grinding mill, which will offset that grant income. So you'll probably see, say a couple of hundred grand depreciation a year on the declining balance after that.

How long does the slotting fee last until a potential new 1 is required?

I will answer that. We have -- since acquisition, this is the first slotting fee. I have no intention of paying another slotting fee at any time in the near future. This was a major investment for us and a 1 and done. If a retailer with substantial size came to us with a value proposition similar to what we had with this 1 and we spoke about $1.8 million in revenue in 10 months, a $500,000 fee, we will consider it on a case by case. But this is not a normal course of business for us. It was a onetime. It's only time we've done it, and I do not want to make this a regular occurrence for us. So I do not view this as something that we will repetitively do in the future.

How are the lightweight [ clumping ] cat litter sales going?

So we are doing it for a private label customer. There appears to be good uptake for that private label. We're not at liberty to say who, but we are pleased. We have not yet launched our own WunderCat lightweight brand, but we will do that at some point in the near future post installation of the new equipment, the big steel frame that we have already built and need to put in place over the next several months. And once that's installed, then we will launch our own WunderCat brand of lightweight, and I would ask the person that pose that question to ask it again in 6 months.

All right. Following the automation robotics improvement, what does the annual revenue capacity look like?

We have excess grinding, drying and packaging capacity. This is not a function of machinery now. It's a function of going out and earning the business. So we could -- with the current infrastructure that we have, we could double the revenue of this company with minimal incremental investment other than what has been made and the 4 projects that were outlined today. But that's not a function of product -- equipment throughput, that's a function of going out and earning that business.

What are CapEx and R&D expectations for fiscal 2027? Should they be similar levels on a year-to-year basis?

Kyle, I'll hand that over to you.

Can you please repeat that one?

Oh, I just delete the question over the queue. What are CapEx and R&D expenditures expected for 2027? And how does that compare with the last year?

I think that's similar to the first question we discussed, which is not -- we're not comfortable giving guidance on that right now just due to the state of the PozGlass plant and how much will be needed versus being able to give a comfortable guidance number on what that looks like as well as with active R&D. There's things that we may invest in and just -- I can't give an answer that would be reasonable today.

All right. How do you plan to generate revenue with PozGlass?

I will answer that. So I have stated multiple times in a public setting that the pilot plant is not designed to be a profit center. It's designed to quantify the cost of scaling up to a full-sized plant or a larger plant as well as to demonstrate the LCA or life cycle assessment number, the carbon footprint when operational. That being said, we are in active discussions for our first commercial PozGlass plant. I'm not going to provide any sort of guidance as to size or location, but we are actively looking at where does the first commercial plant go. We have found an interesting location in Canada, but it's very early stage and we have to operate this plant, both making CanBlast and PozGlass first. But this pilot plant is not meant to affect our profitability as a company in any sort of contributory way. It's never been designed to be that. Are there components of this plants that could be utilized in a larger plant? There are some components, but for the most case, it is a pilot plant. And we do plan to dismantle it. It will not be running forever. I think realistically, you're looking at the end of 2028 for dismantling this plant. And -- so it is simply not designed to be a cash cow for our operations.

Will it generate revenue during that time?

Yes, it will.

Can you quantify or estimate how much that could be?