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RE

RENOVARE ENVIRONMENTAL, INC. (RENO)·Q3 2021 Earnings Summary

Executive Summary

  • Record fourth consecutive quarter: revenue rose to $4.5M (+31% QoQ, +509% YoY) on strong Carnival digester shipments; contribution margin expanded to 23% from 14% in Q2, reflecting better equipment and service margins .
  • Operating loss improved sharply to $(1.1)M vs $(2.0)M in Q2 and $(3.9)M in Q3’20, driven by gross margin improvement and SG&A reductions to $1.7M from $2.0M in Q2 .
  • Martinsburg (HEBioT/SRF) operations improved but remained a drag; contribution moved from −134% in Q2 to −53% in Q3 as production stabilized and SRF customer issues eased .
  • No formal financial guidance provided; management signaled continued growth from Carnival, higher education and supermarket pilots, and potential M&A as catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • “Fourth consecutive quarter of record revenue…revenues rising 31% to $4.5 million versus the prior quarter and 509% over the year-ago quarter,” with operating loss improving to $(1.1)M from $(2.0)M in Q2 .
    • Margin mix improved: contribution margin to 23% (from 14% in Q2); equipment contribution margin to 33% (from 31%) and rental/service margin to 42% (from 34%) .
    • Sector traction broadened: continued Carnival shipments, expansion in higher education, and supermarket pilot efforts; CEO noted “continued determination…across…verticals” and “resumption of cruising” as support .

  • What Went Wrong

    • HEBioT/Martinsburg still negative contribution despite improvement (−53% in Q3 vs −134% in Q2), indicating continued profitability headwinds in SRF operations .
    • High interest burden persisted: Q3 interest expense of ~$1.04M weighed on net results, contributing to net loss to common shareholders of $(1.99)M and EPS of $(0.07) .
    • Cash balance tightened: unrestricted cash ended Q3 at ~$0.6M (restricted ~$6.4M), limiting flexibility absent continued execution and external financing .

Financial Results

Overall performance (chronological order: oldest → newest):

MetricQ3 2020Q1 2021Q2 2021Q3 2021
Revenue ($M)$0.743 $3.040 $3.455 $4.523
Net Loss – Common ($M)$(3.520) $(1.817) $(2.555) $(1.985)
EPS (Basic & Diluted)$(0.16) $(0.07) $(0.09) $(0.07)
Operating Loss ($M)$(3.917) $(1.277) $(2.042) $(1.147)
Operating Margin (%)(527%) (42%) (59%) (25%)
Contribution Margin (%)(69%) 29% 14% 23%
SG&A ($M)$1.924 $1.646 $2.012 $1.699
Unrestricted Cash ($M)—$7.314 $2.279 $0.622

Segment revenue mix by quarter:

Revenue by Line ($)Q3 2020Q1 2021Q2 2021Q3 2021
Equipment Sales$293,876 $2,266,513 $2,630,993 $3,152,639
Rental, Service & Maintenance$423,996 $421,229 $447,427 $785,576
HEBioT$625 $352,548 $376,554 $585,102
Mgmt Fees/Other (related)$24,380 $0 $25,000 $0
Total Revenue$742,877 $3,040,290 $3,454,974 $4,523,317

Select KPIs and cost metrics:

KPIQ3 2020Q1 2021Q2 2021Q3 2021
Equipment Contribution Margin %——31% 33%
Rental/Service Contribution Margin %——34% 42%
HEBioT Contribution %——(134%) (53%)
Interest Expense ($M)$1.023 $1.028 $1.031 $1.042
Restricted Cash ($M)—$1.885 + $2.608 = $4.493 $3.809 + $2.603 = $6.412 $3.765 + $2.604 = $6.368

Estimates vs. actuals (S&P Global consensus):

  • S&P Global consensus estimates for Q3 2021 (revenue, EPS, EBITDA) were unavailable for this ticker; therefore, we cannot present a vs. estimates comparison. Attempts to retrieve consensus returned no CIQ mapping for the company [functions.GetEstimates error].

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q4 2021Not providedNot providedMaintained: No formal guidance
MarginsFY/Q4 2021Not providedFocus on cost optimization and margin improvement; no numeric targetsNarrative only
Capex/OpEx/TaxFY/Q4 2021Not providedNot provided—
Segment-specificFY/Q4 2021Not providedExpect continued Carnival shipments; pilots in higher education and supermarkets; evaluating M&ANarrative only

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2021)Previous Mentions (Q2 2021)Current Period (Q3 2021)Trend
Carnival/MaritimeExpanding orders; bulk 2021 fulfillment expected Third straight record quarter driven by Carnival; majority of orders in 2021, small spillover possible Continued strong shipments; additional orders ongoing; some deliveries into Q4 Stable to positive
Higher EducationSales traction; targeted vertical Ongoing BD in universities Added orders; student research collaborations across multiple universities Positive
Supermarket/Retail pilotsTarget vertical Active engagement in retail Supermarket pilot underway to evaluate digester benefits Positive
HEBioT/Martinsburg SRF opsOperational challenges and SRF customer constraints; exploring alternative SRF uses Customer shutdowns hurt sales; ops improved; Lone Cypress PM agreement to broaden SRF uses Ops improved; negative contribution narrowed to −53%; pursuing additional SRF customers and applications Improving, still negative
Supply chain/inflationManageable; some pricing pressure Stainless steel price pressure reduced contribution vs Q1 “Got ahead” of supply chain; no material disruptions Easing
Regulatory (WV SB 368)—WV eliminated solid waste assessment fees, supporting WV expansion Continued tailwind for WV projects Supportive
M&A/Strategic options——Actively evaluating accretive strategic alliances/acquisitions Emerging

Management Commentary

  • “Fourth consecutive quarter of record revenue…we also made significant progress in our efforts to cut costs and improve our profitability…operating loss improved to a loss of ($1.1) million…SG&A…declined to $1.7 million…and…gross margins…increased to 23%” .
  • “We continue to accomplish strong growth in our Maritime/Cruise vertical while fostering an expansion in Higher Education, Retail, and other verticals…strong performance in our Martinsburg Plant” .
  • “We are heartened by the resumption of cruising, and we look forward to continuing our strong relationship with Carnival” .

Q&A Highlights

  • SRF sales drivers: growth came from improved Martinsburg operations, not new customers; pipeline for additional SRF customers and applications developing .
  • Carnival deliveries: additional orders continue; part of backlog to deliver in Q4; ongoing relationship includes parts/recurring revenue components .
  • Visibility and growth: management expects continued revenue growth via organic (digesters, SRF) and possible acquisitions; active evaluations underway .
  • SG&A outlook: disciplined management; modest increases possible on sales costs as distribution expands, but corporate staffing considered adequate .
  • HEBioT scale: plant designed for ~110k tons/year; management pursuing additional plant opportunities (WV, NY), while acknowledging ongoing litigation in Rensselaer .

Estimates Context

  • S&P Global consensus estimates (revenue, EPS, EBITDA) for Q3 2021 were unavailable for this ticker at the time of review; as a result, no vs. consensus comparisons are presented. The company did not provide formal numerical guidance in the press release or call .

Key Takeaways for Investors

  • Positive operating trajectory: sustained sequential revenue growth with improved contribution and operating margins indicates operating leverage from digester shipments and SG&A control .
  • Carnival remains the cornerstone near-term, with Q4 deliveries expected; diversification into higher ed and retail pilots offers incremental growth vectors .
  • HEBioT is improving but still dilutive; further progress on SRF customer base and alternative fuel applications is crucial for profitability inflection .
  • Balance sheet watch: unrestricted cash of $0.6M and significant interest expense ($1.04M/quarter) underscore the importance of execution and potential need for financing if growth investments accelerate .
  • Potential catalysts: additional digester wins (maritime and new verticals), SRF offtake/customer additions, progress on new plant development, and any accretive M&A could re-rate expectations .
  • Risk factors: SRF plant profitability timing, customer concentration in Carnival, and ongoing macro cost dynamics (materials) remain key variables .

Sources:

  • Q3 2021 8-K and press release, including full financial tables .
  • Q3 2021 earnings call transcript (prepared remarks and Q&A) .
  • Q2 2021 8-K and call for trend analysis .
  • Q1 2021 8-K and call for trend analysis .