Smart grid technology leader Tantalus Systems Holding Inc. (TSX: GRID) ("Tantalus" or the "Company") announced today the financial results for the third quarter and nine months ended September 30, 2021.
"In the third quarter of 2021, Tantalus achieved a number of important milestones. We not only witnessed our user community exceed 200 utilities by adding 7 new utilities in the quarter, but we also launched our first commercially-available predictive data analytics tool to improve the resiliency and reliability of electric distribution grids. In addition to our continued commercial success, we also closed our first prospectus-based financing to further strengthen our balance sheet in support of growth initiatives," said Peter Londa, President & CEO of Tantalus.
Extreme weather continues to challenge the resiliency of distribution grids while the availability and accelerating adoption of electric vehicles and other distributed energy resources is stressing existing grid infrastructure. Coupled with investments being made by homeowners and businesses to install roof-top solar panels to reduce carbon footprints, the utility industry continues to confront an unprecedented number of challenges that require upgrades to distribution grids across North America. "These challenges create urgency among utilities to transform their grids into digital networks that are capable of accessing granular data in order to gain situational awareness, as well as command and control of critical assets," said Londa.
To help utilities improve the resiliency of their grids by leveraging such granular data, the Company commercially launched the Tantalus Grid Reliability Analytics ("TGRA") tool. TGRA accesses data from Tantalus' edge devices installed in meters and other grid equipment in order to help utilities detect anomalies in power quality that can lead to premature failure of critical assets and sustained outages. After launching the analytics tool in September, Tantalus quickly secured subscriptions to a Software-as-a-Service (SaaS) offering from six utilities within the Company's existing user community. The tool is delivering quantifiable benefits to those utilities and will serve as the foundation for leveraging data captured by Tantalus' smart grid platform to help improve their efficiency, reliability and sustainability.
"We are extremely pleased with our team's performance during the quarter despite witnessing the continuing impact of COVID-19 and global supply chain constraints for semiconductors and other electronic components. The global supply chain challenges directly correlated to backlog revenue being pushed out of Q3 and into future periods. Coupled with the absorption of costs associated with becoming a publicly-traded company and the loss of the Canadian government's Scientific Research & Experimental Development ("SR&ED") funding as a result of no longer being a private company, we delivered negative Adjusted EBITDA for the first time in over 4 years. While it is unfortunate to see our streak of 18 consecutive quarters of delivering positive Adjusted EBITDA come to an end, we remain confident that Tantalus is extremely well positioned to deliver next-generation smart grid solutions as the utility industry accelerates their investments to build the grid of the future," said Londa.
Q3, 2021 and Year to Date Financial Summary
Financial information is reported by Tantalus in United States dollars ("US$") unless otherwise specified and is presented in accordance with International Financial Reporting Standards ("IFRS").
Key results for the quarter are compared to the same timeframe in the previous year unless otherwise stated.
– Revenue of US$8.5 million reported compared to US$8.8 million for the prior year and US$24.6 million during the first nine-months of 2021 compared to US$23.7 million for the same nine-month period in 2020.
– Gross Profit of US$3.6 million representing Gross Profit margin of 42% for Q3, 2021 decreased from the prior year of US$4.1 million and 47% due to the revenue mix and increasing costs associated with supply chain constraints and logistics. Gross Profit reported for the first nine months of 2021 was US$11.0 million representing Gross Profit margin of 45% compared to US$11.3 million and 48% for 2020.
– Core Business Operating Expenses for Q3, 2021 increased to US$4.2 million compared to US$3.2 million in the prior year and to US$11.5 million during the first nine months of 2021 from US$9.5 million for the same nine-month period in 2020 due primarily to increased public company expenses and loss of funding from the Canadian government's SR&ED program as a result of becoming a publicly-traded company in 2021. On a comparative basis, excluding the impact of SR&ED benefits associated with being a private company in 2020, the variance between the Operating Expenses of the Company is US$4.2 million versus US$3.4 million dollars for the three months ended September 30, 2021 and 2020, respectively and US$11.6 million versus US$10.5 million for the nine months ended September 30, 2021 and 2020, respectively.
– Adjusted EBITDA decreased to (US$580,535) in Q3, 2021 compared to US$951,927 in the prior year and to (US$459,710) for the nine months ended September 30, 2021 compared to US$1.8 million in 2020 with the decline due primarily to the incremental public company expenses incurred and the reduction in SR&ED funding in 2021.
– Closed a CDN$10.6 million overnight-marketed financing on August 12, 2021 which strengthened the Company's balance sheet and positions Tantalus for additional organic growth as well as strategic partnerships and M&A opportunities.
– The Company had total assets of US$32.9 million as at September 30, 2021, inclusive of US$14.6 million in cash, compared to US$23.5 million as at December 31, 2020, inclusive of US$4.6 million in cash, with Adjusted Working Capital as at September 30, 2021 of US$15.6 million compared to US$3.5 million as at December 31, 2020.
While the growth horizon remains favorable for Tantalus and is being bolstered by the United States' unprecedented Infrastructure Investment and Jobs Act, signed into law on November 15, 2021, management is mindful of the ongoing worldwide disruption to the availability of electronic components, particularly with respect to semiconductors. The COVID-19 pandemic continues to impact Tantalus through delays in project deployments, restricted access to in-person meetings with utilities as part of the sales process and delays in decision-making by utilities that are assessing modernization plans.
Management continues to implement polices to prioritize the health and safety of our employees while maintaining regular interactions with customers. Similarly, management is navigating through the semiconductor shortage by implementing a number of strategies to mitigate the impact of supply chain constraints by building inventory of long-lead components, qualifying alternative component providers, increasing buffer stock and coordinating directly with our contract manufacturer.
The Company will hold a conference call and webcast to discuss the financial results on Tuesday, November 16, 2021 at 11:00 a.m. Eastern Time.
Participant Dial In (Toll Free) 1-866-807-9684
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A conference call replay will be available until November 23, 2021. The webcast will be available until April 15, 2022 at the link set out above.
To access the conference call replay, please see details below:
US Toll Free: 1-877-344-7529
International Toll: 1-412-317-0088
Canada Toll Free 1-855-669-9658
Replay Access Code 10161714
Financial Statements and Management Discussion & Analysis
Please see the unaudited interim consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for more details. The unaudited interim consolidated financial statements for the three and nine months ended September 30, 2021 and related MD&A have been reviewed and approved by Tantalus' Audit Committee and Board of Directors. For a more detailed explanation and analysis, please refer to the MD&A that has been filed on SEDAR at www.sedar.com and is also available on the Company's website at www.tantalus.com.
Tantalus is a smart grid technology company that transforms aging one-way grids into future-proofed multi-directional grids that improve the efficiency, reliability and sustainability of public power and electric cooperative utilities and the communities they serve. Our solutions are purpose-built to allow utilities to restore power quickly after major disruptions, adapt to rapidly shifting consumer expectations and population shifts, innovate new solutions based on the adoption of distributed energy resources and evolve their grid infrastructure at their own pace without needless cost or complexity. All this gives our user community the flexibility they need to get the most value from existing infrastructure investments while planning for future requirements. Learn more at www.tantalus.com.
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The preceding discussion of financial results includes reference to Gross Profit, Core Business Operating Expenses, Adjusted EBITDA and Adjusted Working Capital, which do not have a standardized meaning under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Management believes that Gross Profit is a useful indicator for investors, and is used by management, in evaluating the operating performance of the Company and is comprised of revenues less cost of sales. Management believes that Core Business Operating Expenses is a useful indicator for investors, and is used by management, in evaluating the operating expenses of the Company. Core Business Operating Expenses is exclusive of depreciation and amortization, share-based compensation and non-core business related expenses. Management believes that Adjusted EBITDA is a useful indicator for investors, and is used by management, in evaluating the operating performance of the Company. Adjusted EBITDA is comprised of income (loss) less interest, income tax, depreciation, amortization, stock-based compensation, foreign exchange gain (loss) and other non-core business related income / expenses and is provided as a proxy for the cash earnings from the operations of the business. Management believes Adjusted Working Capital is a useful indicator for investors, and is used by management, for evaluating the operating liquidity available to the Company. Adjusted Working Capital is comprised of current assets less current liabilities exclusive of the Company's bank loan.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this news release.
This news release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information is generally identifiable by use of the words "believes", "may", "plans", "will", "anticipates", "intends", "could", "estimates", "expects", "forecasts", "projects" and similar expressions, and the negative of such expressions. Forward-looking information in this news release includes statements regarding: the challenges facing utilities to upgrade distribution grids in North America, the benefits of TGRA, the realization of revenue pushed out of Q3, 2021, the positioning of Tantalus solutions, the favorable growth horizon of Tantalus, the adoption and development of new products and offerings, the ability to attract customers accessing government stimulus funding, the impact of and Tantalus' ability to manage supply chain constraints and the growth of the Company's user community,
In connection with the forward-looking information contained in this news release, Tantalus has made numerous assumptions, regarding, among other things: the expected impact of COVID-19 and the expected timing of new product introductions. While Tantalus considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies. Additionally, there are known and unknown risk factors which could cause Tantalus' actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein. Known risk factors include, among others: the impacts of COVID-19 are unpredictable and could have significant impacts on Tantalus' financial performance; sales cycles to Tantalus' customers can be lengthy and unpredictable and require significant employee time with no assurances that a prospective customer will select Tantalus' products and services; Tantalus' financial and operational performance significantly depends on its ability to attract and retain customers and its ability to develop new products and to enhance and sustain the quality of existing products to retain such customers; Tantalus depends on a limited number of key suppliers and if such suppliers fail to provide Tantalus with sufficient quantities of components at acceptable levels of quality and at anticipated costs, Tantalus' revenue and operating results could be materially and adversely affected; Tantalus has a prior history of operating losses and Tantalus may not sustain profitability on a quarterly or annual basis; Tantalus' quarterly results are inherently unpredictable and subject to substantial fluctuations; Tantalus' success depends in part on Tantalus' ability to integrate its technology into devices and its relationship with device manufacturers; Tantalus' marketing efforts depend significantly on Tantalus' ability to receive positive references from Tantalus' existing customers; the markets for Tantalus' products and services, smart grid, smart city, and broader IoT technology in general, are still developing - if the markets develop less extensively or more slowly than Tantalus expects, Tantalus' business could be harmed; Tantalus operates in a highly competitive industry and Tantalus competes against many companies with substantially greater financial and other resources, and Tantalus' market share and results of operations may be reduced if Tantalus is unable to respond to competitors effectively; Tantalus is dependent on the utility industry, which has experienced volatility in capital spending - this volatility could cause Tantalus' results of operations to vary significantly from period to period; Tantalus' reliance on certain infrastructure and information technology systems make it vulnerable to the potential adverse effects of cyber-attacks and other breaches; if Tantalus' products contain defects or otherwise fail to perform as expected, Tantalus could be liable for damages and incur unanticipated warranty, recall and other related expenses, Tantalus' reputation could be damaged, Tantalus could lose market share and, as a result, Tantalus' financial condition or results of operations could suffer; the nature of Tantalus' business exposes it to the unpredictable risks of contractual disputes; the loss of key employees and the inability to attract and retain qualified personnel could harm Tantalus' business; Tantalus' business is exposed to potential risks associated with international sales and operations; foreign exchange rate fluctuations could harm Tantalus' results or operations; Tantalus and its customers operate in a highly regulated business environment and changes in regulation could impose costs on Tantalus or make Tantalus' products less economical; Tantalus' inability to acquire and integrate other businesses, products or technologies could seriously harm Tantalus' competitive position; intellectual property infringement claims could be costly and time-consuming to prosecute or defend; substantially all of Tantalus' current products depend on the availability and are subject to the regulation of radio spectrum in the United States and abroad; and interruptions or delays in services from Tantalus' third-party data center facilities, or problems with the third-party hardware or software that Tantalus employs, could impair the delivery of its services and harm Tantalus' business.
A more complete discussion of the risks and uncertainties facing Tantalus is disclosed under the heading "Risk Factors" in the Tantalus' Filing Statement dated January 28, 2021, as well as the MD&A included with Tantalus' continuous disclosure filings with Canadian securities regulatory authorities available at www.sedar.com. All forward-looking information herein is qualified in its entirety by this cautionary statement, and Tantalus disclaims any obligation to revise or update any such forward-looking information or to publicly announce the result of any revisions to any of the forward-looking information contained herein to reflect future results, events or developments, except as required by law.
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