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Greenlane | Net losses a concern?

Greenlane Renewables Inc (TOR: GRN) is a leading global provider of biogas upgrading systems. The company helps waste producers, gas utilities, and project developers turn a low-value product into a high-value low-carbon renewable resource. Its biogas upgrading systems remove impurities and separate carbon dioxide from biomethane in raw biogas to create clean RNG for pipeline injection, liquefaction, or direct use as a vehicle fuel.

(Source: Greenlane Renewables Inc)

Greenlane Renewables posted its Q2 for the year on 9 August 2022. Revenue for the quarter increased 38.5% to C$18.1m compared to last year's quarter, however, its net losses sank deeper and more than doubled to (C$2.17m). As a result, its net margin loss worsened from (8.6%) to (12%).

(Property of EcoShares)

Looking at previous quarters, the company had managed to make a slight net profit of C$0.05m in last year's Q3. Despite this, losses began to pile up and progressively worsened going into the new year.

(Property of EcoShares)

The company has been significantly growing its revenue over recent years, rising from C$9.12 to C$55m in just two years. Its net losses had been somewhat controlled, with a net margin loss of (4.5%) in FY21.

(Property of EcoShares)

Given the higher than expected losses in the current year, investors may have been slightly spooked short-term. Shares in Greenlane Renewables had spiked at the end of 2020, closing at a high of C$2.67 per share on 19 February 2021. Since then, shares have been tumbling and closed at C$0.78 per share on 9 September 2022.

(Source: Google Finance)

The first thing worth checking when a company is seeing consistent net losses is how strained its current assets to current liabilities are becoming.

In the short term, the current assets and current liabilities can measure a company's ability to pay short-term debt or obligations due within one year. Greenlane Renewables' short-term liquidity percentage in Q2 was 45.3% (current liabilities/current assets) - which although controlled is edging towards a cautious 50%+. Current assets and current liabilities were C$53m and C$24m, respectively. Compared to last year's quarter, current assets have slightly decreased by 3.3% as current liabilities jumped 41.2% - which had previously held a more favourable 30.9% short-term liquidity percentage.

(Property of EcoShares)

In the long-term, total assets for Q2 climbed 9.5% to C$81m from levels one year ago - while total liabilities also increased at a larger rate by 64.7% to C$28m. This meant long-term liquidity for the quarter was 34.6%, compared with 23% last year. Total cash levels have also decreased by 37.8% to C$23m.

(Property of EcoShares)

Looking at previous years, total assets have been significantly rising and ended FY21 with C$79m. Total liabilities had decreased in FY20 before rising again the following year to C$22m, meaning the long-term liquidity for FY21 was 27.9% (the lowest in three years).

(Property of EcoShares)

Greenlane Renewables releases its Q3 earnings on approximately 14 November, 2022.


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