Executive Summary

Q2 2021 delivered third consecutive record revenue at $3.45M, up 14% q/q and 171% y/y, driven primarily by digester equipment sales to Carnival; EPS improved to -$0.09 from -$0.16 y/y but worsened sequentially from -$0.07 as margins compressed on higher stainless steel input costs .
Contribution margin fell to 14% from 29% in Q1 (supply chain and stainless steel prices) while SG&A rose to 58% of revenue; loss from operations expanded sequentially to 59% of revenue (from 42% in Q1), though markedly better y/y (186% in Q2 2020) .
HEBioT revenues remained constrained by SRF customer maintenance shutdowns (down 58% y/y to ~$0.38M), but management expects more consistent production, delivery, and sales in H2 2021 following resolution of customer issues and regulatory tailwinds from West Virginia Senate Bill 368 eliminating solid waste assessment fees effective July 1 .
Street consensus via S&P Global was unavailable for RENO this quarter; estimates context is thus based on company-reported figures only. Potential stock reaction catalysts: continued Carnival order fulfillment in 2021, WV regulatory tailwinds, and broader SRF end-market expansion via Lone Cypress partnership .

What Went Well and What Went Wrong

What Went Well

Third consecutive quarter of record revenue ($3.45M), with strong digester equipment sales to Carnival and sequential growth across all lines; CEO: “Our second quarter 2021 performance demonstrates consistent execution… Revenue of $3.5 million represents our third straight quarter of record revenue” .
Regulatory tailwind: WV Senate Bill 368 eliminated solid waste assessment fees effective July 1, improving plant economics and aiding expansion plans; CFO noted reduction in solid waste taxes going forward .
Strategic partnership: project management agreement with Lone Cypress to evaluate additional HEBioT projects and broaden SRF uses (e.g., hydrogen, gasification, bioplastics), supporting diversification of SRF demand .

What Went Wrong

Margin pressure: Contribution margin fell to 14% (from 29% in Q1) due to supply chain pressures and higher stainless steel prices, compressing profitability despite revenue growth .
HEBioT headwinds: Revenues down 58% y/y to ~$0.38M on SRF customer maintenance shutdowns; consolidated loss from operations widened sequentially to -$2.04M and net loss to -$3.08M .
Cash burn: Net cash used in operating activities was -$4.26M in H1 2021; unrestricted cash fell to $2.28M at June 30 from $7.31M at March 31, highlighting liquidity sensitivity amid ongoing losses .

Financial Results

Summary Financials vs Prior Quarter and Prior Year

Metric	Q2 2020	Q1 2021	Q2 2021
Revenue ($USD)	$1,273,932	$3,040,290	$3,454,974
Net Loss Attributable to Parent ($USD)	-$2,664,881	-$1,634,213	-$2,380,204
Loss from Operations ($USD)	-$2,365,246	-$1,276,502	-$2,041,799
EPS (Basic & Diluted, $)	-$0.16	-$0.07	-$0.09
SG&A as % of Revenue	149%	54%	58%
Loss from Operations as % of Revenue	186%	42%	59%
Contribution Margin (Revenue less direct costs, %)	8%	29%	14%

Notes: The 8-K text contains a minor inconsistency on loss-from-ops % vs Q1; management clarified on the call that loss-from-ops % increased sequentially from 42% in Q1 to 59% in Q2 (still improved y/y from 186%) .

Segment Revenue Breakdown

Segment	Q2 2020	Q1 2021	Q2 2021
Digester & Corporate (Equipment + Rental/Service + Mgmt Fees) ($USD)	~$381,033 (Equipment $0 + Rental/Service $356,033 + Mgmt Fees $25,000)	$2,687,742 (Equipment $2,266,513 + Rental/Service $421,229 + Mgmt Fees $0)	$3,078,420 (Equipment $2,630,993 + Rental/Service $447,427 + Mgmt Fees $0)
HEBioT ($USD)	$892,899	$352,548	$376,554

Management commentary: Digester & Corporate revenues increased >700% y/y (from ~$0.38M to ~$3.1M), driven by Carnival equipment sales; HEBioT revenues declined 58% y/y due to SRF customer maintenance shutdowns .

Liquidity KPIs

KPI	Q1 2021	Q2 2021
Unrestricted Cash ($USD)	$7,314,056	$2,279,060
Net Cash Used in Operating Activities ($USD, YTD)	-$1,939,521 (Q1)	-$4,260,305 (H1)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Carnival digester order fulfillment	FY 2021	Execute across 2020–2021	Bulk of orders fulfilled in 2021; minor spillover into 2022 for parts	Maintained timeline; slight spillover risk
HEBioT SRF sales trajectory	H2 2021	No prior quantitative guidance	Expect more consistent production, delivery, and sales growth as customer issues resolved	Introduced operational expectation (raised)
Solid waste assessment taxes (HEBioT)	Q3 2021 onward	Historically treated as landfill; fees applied	WV SB 368 eliminates solid waste assessment fees effective July 1, reducing SG&A run-rate	Lowered cost structure
Formal financial guidance (revenue, margins, EPS)	FY/Q3	None provided	None provided	Maintained: No formal numerical guidance

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2020 and Q1 2021)	Current Period (Q2 2021)	Trend
Supply chain and input costs	Monitoring inflation/supply chain; manageable pressure	Stainless steel price increases compressed contribution margin to 14%	Deteriorating costs; operationally managed
Regulatory/legal (WV SB 368)	N/A	WV eliminated solid waste assessment fees; improves economics and expansion prospects	Positive tailwind
HEBioT plant operations and SRF customer	Mechanical challenges and customer acceptance constraints; negative contribution	Customer maintenance shutdowns hampered sales; issues largely resolved; expecting H2 improvement	Stabilizing, recovery expected
Digester demand and pipeline	Expanded orders across Carnival brands; pursuing healthcare, grocery, government	Bulk Carnival execution in 2021; pipeline in retail, healthcare, government; data analytics upsell	Broadening across verticals
SRF alternative uses and Lone Cypress	Exploring gasification, bioplastics; innovation focus	Lone Cypress partnership to evaluate projects, hydrogen, gasification, bioplastics	Advancing commercialization
Liquidity/cash	Unrestricted cash $7.3M at 3/31; equity raise Q1	Unrestricted cash $2.3M at 6/30; restricted cash tied to WV bonds explained	Lower cash; structure clarified

Management Commentary

CEO: “Revenue of $3.5 million represents our third straight quarter of record revenue… This growth was largely driven by digester purchases by Carnival Corporation” .
CEO on HEBioT: “We have improved plant operations… Maintenance and repairs shutdowns at our SRF customer led to weaker than anticipated performance… Those issues have been largely resolved” .
CFO: “Contribution… increased to 14%… decreased from 29% in the first quarter… driven by supply chain pressures and an increase in stainless steel prices” .
CEO on Lone Cypress: “We are evaluating… new HEBioT projects… exploring additional uses for our SRF… hydrogen… gasification and bioplastics” .
CFO on taxes: “Effective July 1 under the Senate bill, we will no longer be responsible for paying the solid waste tax going forward” .

Q&A Highlights

Carnival fulfillment: Bulk of orders will be fulfilled in 2021, with potential minor parts spillover into 2022 .
Digesters pipeline: Interest beyond maritime; pursuing retail, healthcare, government with emphasis on data analytics for supply chain transparency .
HEBioT trajectory: Second-quarter softness due to customer acceptance (not production capability); management anticipates better results in H2 2021 .
Lone Cypress scope: Focus on expanding SRF end markets and evaluating next HEBioT projects; adds external capability for large-scale project management .
Restricted cash: Tied to WV bond reserve and operational funds; released per bond terms (not immediate working capital) .
SG&A trajectory: Aim to rein in costs; Q2 SG&A elevated in part by solid waste assessments and property taxes, which will no longer apply post-July 1 .

Estimates Context

Wall Street consensus (S&P Global) for RENO was unavailable for Q2 2021 due to missing Capital IQ mapping; therefore, no revenue or EPS estimate comparisons are provided. Values retrieved from S&P Global were unavailable for this ticker during the period.
Implication: Post-rename micro-cap coverage appears limited; model updates will rely on company-reported trajectories (Carnival fulfillment cadence, HEBioT normalization, cost tailwinds) rather than near-term consensus anchoring [GetEstimates error].

Key Takeaways for Investors

Revenue momentum intact, but margin compression from stainless steel costs requires monitoring; pricing, cost pass-through, and mix will drive contribution stabilization .
Digester demand under Carnival continues to underpin near-term growth; watch for delivery cadence, incremental ship capacity needs, and data analytics recurring revenue opportunities .
HEBioT recovery is a second-half story; resolution of SRF customer issues and diversification of SRF offtake via Lone Cypress are pivotal to reducing single-customer risk .
Regulatory tailwinds (WV SB 368) lower HEBioT cost structure and improve project IRRs; increases optionality for in-state expansion .
Liquidity tightened q/q; with unrestricted cash at $2.3M and H1 operating cash burn of -$4.26M, investors should watch working capital, financing flexibility, and bond-related restricted cash constraints .
Absence of Street coverage/consensus suggests higher volatility around prints; narrative catalysts (Carnival fulfillment milestones, SRF end-market wins, regulatory updates) can drive stock reactions.
Medium-term thesis hinges on scaling digesters across more verticals and normalizing HEBioT operations with diversified SRF demand; execution on these fronts is the key rerating path .

Cross-references and Non-GAAP Notes

“Contribution” is an internal operational metric defined as revenues less direct costs; management provided percentage figures in releases/call .
Loss-from-ops % sequential change discrepancy in the press release (Q2 vs Q1) was clarified by management on the call (increase from 42% to 59%) .

RENOVARE ENVIRONMENTAL, INC. (RENO)·Q2 2021 Earnings Summary