Thank you, operator and good afternoon. Welcome to the Greenlane Renewables first quarter 2021 conference call.

I am joined today by Brad Douville, Greenlane’s President and Chief Executive Officer and Lynda Freeman, Greenlane’s Chief Financial Officer. Before beginning our formal remarks, we would like to remind listeners that today’s discussion may contain forward-looking statements that reflect current views with respect to future events.

Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Greenlane Renewables doesn’t undertake to update any forward-looking statements, except as maybe required by applicable laws.

Listeners are urged to review the full discussion of risk factors in the company’s Annual Information Form, which has been filed with Canadian securities regulators. Lastly, while this conference call is open to the public and for the sake of brevity, questions will be prioritized for analysts.

Now, I will turn the call over to Brad.

Good afternoon and thank you everyone for participating on today’s call. I would like to start off with a few financial highlights from the first quarter before passing it over to Lynda for a deeper look at the numbers.

I will also talk about the significance of some recent events that demonstrate continued positive outlook for our renewable natural gas and its importance in the mix of solutions to decarbonize the world energy systems, those efforts by governments companies and individuals accelerate. The company’s first quarter record results had another milestone for us as we continue to rapidly scale up to meet the fast growing demand for renewable natural gas or RNG.

We delivered our third consecutive quarter of record revenue and second consecutive quarter of positive adjusted EBITDA. Since the first quarter of 2020, we have increased quarterly revenue on average by over 40%, which is indicative of the strength of our sales pipeline, our ability to convert more prospects into signed contracts, then deliver against them and the overall growth of the global RNG market.

In 2020, our revenues grew 100% over 2019. To maintain this level of annual growth trajectory, it will be our focus to add further contract wins from our sales pipeline to our sales order backlog.

We continually update our pipeline of active system sales opportunities, which at March 31 was valued at approximately $715 million. Our sales pipeline represents a significant universe of sales potential that will funnel down through our sales process then move into our sales order backlog once successfully converted into contract wins.

Year-to-date in 2021, we have been winning biogas upgrading system sales contracts across multiple geographies and technologies. In the first quarter, we announced new contract wins totaling $3.6 million, including supply of a membrane separation system for a project in the Midwest U.S.

to produce RNG from dairy operations and a Pressure Swing Absorption, or PSA system for a project in Brazil, the fifth contract win in the country for Greenlane. In the first month of Q2, we announced another $6.2 million in new system supply contracts.

First was the PSA system for Colombia, which will be the first commercial scale biogas upgrading system deployed in the country producing clean, low carbon RNG for our direct injection into the local natural gas grid. This marks Greenlane’s 19th country for technology deployment and 12th country to be the first to supply biogas upgrading equipment.

The second contract was for the supply of the systems into Spain utilizing Greenlane’s water-wash technology. We see the potential for further near-term conversion of sales pipeline opportunities.

In terms of our balance sheet, we are in the enviable financial position, exiting the quarter with over $37 million in cash and no debt. Our strong liquidity provides us with the opportunity to develop and invest in new RNG projects, pursue strategic growth initiatives and further invest in product enhancements.

On the strategic front related to our build-own-operate model, in Europe, we continue to pursue upgrading-as-a-service opportunities, whereas in North America, our focus is to address the scarcity of project development capital on the market. The company intends to deploy specialized development capital in the North American market, where it can be helpful to accelerate projects to the ready for construction phase.

Every quarter, we continue to see the decarbonization movement gain momentum in both the public and private sectors from the largest economies in the world to the largest global oil and gas producers. The recent celebration of Earth Day in April saw leaders across the globe declare commitments to curb greenhouse gas emissions, highlighted by the Biden administration in the U.S.

vowed to reduce emissions in that country by at least 50% by 2030. In Canada, the Trudeau government announced its emissions reduction target aiming to reduce the greenhouse gas emissions by 40% to 45% by 2030, while in the UK, a 78% reduction in greenhouse gas emissions by 2035 when we set into law this year.

RNG and the fast growing market for our biogas upgrading systems will play an ever more meaningful role in the transition to proven low carbon and carbon negative energy solutions. Natural gas utilities continue to move forward with emission reduction targets and strategies as well as RNG announcements.

SoCalGas, the largest gas distribution utility in the U.S. set a bold commitment to achieve net zero greenhouse gas emissions by 2045 that aligns with the Paris Climate Agreement and demonstrates the foundational role of gas infrastructure in advancing California’s carbon neutral economy by delivering increasing amounts of RNG.

Enbridge, a leading energy infrastructure company and largest natural gas utility in North America by volume, recently announced the partnership focused on developing RNG projects across Canada, targeting the tremendous potential of converting landfill waste gas into clean RNG for direct injection into local gas networks. As the geography, Canada has over 10,000 landfill sites that account or 20% of our country’s methane emissions.

Today, only one-third of those emissions are captured. Greenlane Renewables continues to be a pure-play in the RNG space and the only company to offer multiple biogas upgrading technologies.

We remain in a strong position, have been growing quickly, and will continue to capture additional growth opportunities as the world advances in the energy transition. With that, I will pass it over to Lynda.

Thanks, Brad and good afternoon, everyone. As a reminder, all figures are in Canadian dollars unless otherwise stated and all comparisons of the first quarter of 2021 against the first quarter of 2020.

As Brad mentioned, Greenlane posted another record quarter as our revenue in the first quarter was $12.2 million, which represents a 317% growth over the comparative period of 2020. We delivered a gross margin in Q1 of 27% or $3.3 million compared to $1.3 million or 44% in the first quarter of 2020.

As we previously highlighted, the higher gross margin in the first quarter of 2020 was a result of a higher proportion of aftercare service revenue in the mix, which typically has a higher gross margin and system sales. Going forward, gross margin is expected to be in the range of 25% to 30% on an annual basis.

Adjusted EBITDA in the first quarter was a profit of $0.6 million, a notable improvement over the $0.8 million loss from the first quarter of 2020. We reported a significant improvement in net loss on a year-over-year basis as our net loss in Q1 2021 was $0.2 million compared to a $1.1 million loss in the comparative quarter 2020.

The improvement is a direct result of higher revenues. As at March 31, 2021, the company’s sales order backlog was $37.7 million.

As a reminder, the sales order backlog is a snapshot in time, which varies from quarter end to quarter end. The sales order backlog increases by the value of new system sales contracts, such as the contract wins announced in April of just over $6 million to be added to the backlog and is drawn down over time as projects progress towards completion with amounts recognizing revenue.

With respect to our balance sheet, as Brad mentioned earlier, it’s in the strongest position it has ever been. During the first quarter we completed a bought deal equity financing for cash proceeds of $24.5 million after the deduction of transaction costs and realized proceeds of $4.1 million from the exercise of outstanding warrants.

In February of this year, we repaid in full the $6 million balance owing on the promissory note due to Pressure Technology, which eliminates all liabilities owed to our former parent. As we exited the first quarter of 2021, we had a cash balance of $37.5 million and no debt, which positions Greenlane well to continue to invest in and grow our core R&D business as well as pursue other strategic initiatives.

We look forward to keeping the shareholders apprised of our progress. And with that, I will open the call to questions.

Thanks. Hi, everyone.

Thanks for taking my question. My first one here just, Brad, I read your comments on providing capital for projects that are ready to move forward and kind of addressing that scarcity of capital that some projects see.

I am wondering if there is any other details you could wrap around that like what kind of terms which you have provided on, what size of funding or projects could you look at and any thoughts on returns that you would target there?

Hi, David. Thanks for the question.

Yes, so we are really talking about slightly different model in North America than we have been pursuing in Europe with our relationship with SWEN Capital Partners. And for the North American model, it’s really development capital and that distinguishes the development process from the construction phase of the project.

So, this is where the sales pipeline number that we quote at the end of each quarter, that’s made up of the number of projects that are somewhere in that spectrum of development activity. And the idea with deploying development capital is to help accelerate those projects toward the ready for construction phase when construction finance is needed for those projects.

So, the deployment of capital from Greenlane would be the smaller amounts of capital in relation to the amounts needed – a much larger amount needed for construction capital to help developers move these projects towards the point when they are ready for construction and that larger amount of capital is deployed.

Okay, great. Thank you.

That’s good color. Thanks.

And then I am just wondering if you could maybe just provide us some qualitative comments on your view of kind of momentum in the business from a sales perspective, I know that metrics like the order backlog and sales quote log can obviously be chunky as projects move in and out of them, but any color that you can provide to that or context just with respect to what you are seeing in the market today?

Well, I think what we are seeing in the market today is reflected in our revenue growth for obvious reasons, because as we win the orders and translate those into revenue, then obviously, we see the growth in the business and things have been growing very quickly. And as you noted, a couple of the metrics that we talk about each and every quarter such as the sales pipeline figure, the sales order backlog, those are metrics that are very much like cash and working capital, which are a snapshot in time.

It’s one specific day in the quarter. So, as you would expect, it would fluctuate.

So by way of example, with the sales order backlog, we issued the number as of March 31 and then shortly thereafter in the first month of Q2 announced another $6 million plus worth of contracts, which of course that adds right away to the backlog figure. So, what is the snapshot in time and it needs to be considered as such?

Okay, fair enough. Thank you for that.

And maybe just one more if I could, there is – it feels like there has been a lot of news lately about some players, particularly in the U.S., but also in Canada coming together, companies like [indiscernible] Energy or the project that Enbridge is targeting in the U.S., does it feel to you like the industry is maturing and that there is more capital chasing RNG development and how do you expect that to or when would you expect that to benefit your business over time?

Well, I think it’s fair to say that these kind of major players and major market activities are already impacting the business. And also, I used the – I think we have to be careful when we use the word maturing, because we are still at an early stage in the market overall.

If we take a step back and say, okay, well, if we are approaching 1% penetration of RNG in the global distribution, I think we are still considerably under 1% that there is – we are just getting started here as an industry. So, there is certainly some bigger players moving into the space.

You have heard me speak before about the entrance in a big way of the oil and gas companies and how that’s injected new capital. These are our customers.

So, the new injections of capital for new projects, all very positive for us. And as I mentioned, we are already seeing the benefit of that in our business, in our growth, in our top line as well as going to the bottom line.

The new announcements that we are seeing the new rice back, which involves [indiscernible] and RE Energy think of that as the customer set. So, these are the kinds of entities that we sell into, so the more of them the better.

And tying it back to our development capital, in the event that we can be helpful to developers who aren’t these bigger players today, then that will result in other incremental new opportunities for Greenlane to sell additional equipment upgrading systems.

Excellent. Thanks for that, Brad and congrats on the really strong results.

Thanks, David.

Good afternoon, guys and congrats on a solid quarter. I guess one question for me, Brad is on, you guys have a solid cash balance right now.

And I know you guys steered away from maybe anything on the M&A front, because you thought everything is expensive in the marketplace. It looks like things are correcting a little bit on the valuation front, are you guys kind of looking at the opportunities, M&A opportunities?

And if so, maybe any color on how should we think about strategic fit? Are you guys looking to expand beyond RNG potentially or focus on RNG and add more technology or getting deeper into the value chain, maybe a little bit of commentary on any prospect on the M&A if possible?

Just wait for the siren to go by. Yes, thanks Ahmad.

Great questions. So as we said, when we did our financing in January that we would have a use of proceeds for a number of things.

One of them was strategic initiatives such as M&A. The other was to invest in development of RNG projects.

So we have already talked a little bit about today the investment in RNG projects, so that’s just getting rolling. On the M&A front, I think the best way to think about that is, as you know, Ahmad, you have been with us since the start, 2019 for us was the go-public journey to launch the business into the public markets, 2020 was all about building the foundation for the business and strengthening the sales pipeline, and then now in 2021 obviously we want to build on what we have created as the core business and look for these other opportunities, including deployment of development capital on projects.

But on the M&A side, these are things that we are indeed looking at. We do intend to stay solely focused on RNG and that’s our plan right now.

We mentioned that the types of things that we would be looking for from an M&A perspective would be increased market share, for example. So, that could be a consolidation of the industry, which we know in industry such as this, there is somewhat fragmentation in it and consolidation is a normal thing in a industry like this at its stage of maturation.

And then the other thing is technology additions to our portfolio. We have different core technologies.

There is always auxiliaries. I often use the example of today in our portfolio.

We don’t directly use liquefaction technology. That’s kind of more of an up and coming sector in certain RNG markets.

That’s one that we partner with today. So just using that as an example, we also talked about hydrogen as hydrogen starts to develop, the one thing I think that’s important to point out is that in we are already in the hydrogen market, because it’s just another vertical that needs to be decarbonized.

Today in the hydrogen market, of course, 98% of the hydrogen in North America is made from fossil natural gas. So, the first step is to displace that fossil gas with renewable natural gas.

And we are already receiving requests for quotes to for biogas upgrading equipment sales that would go into producing RNG to make hydrogen. So, in many respects, we are already there whether we need to add anything within our portfolio to have greater exposure or not, those are things that are in front of us and decisions will be made accordingly over time.

That’s great color, Brad. I appreciate it.

And maybe one more for Lynda, SG&A line looks like more or less within our expectations, is that a good run-rate to take forward for at least for this year based on your current growth profile and the projects you are about to deliver?

Yes. I mean, it’s a good question obviously.

Our G&A is up on Q1 of last year, but it is in line with expectations to be honest. I would look at it – the way we look at it is as we increase revenue, I’d say probably around 10% to 15% of that will go to growing the bottom line or growing the EBITDA.

I think as we go through 2021, we will start to reach a point probably towards the end of ‘21, but we start to plateau in terms of our G&A growth as we – because right now, we are in a bit of a scale-up phase where we are starting up for the increased contracts that we won and putting processes in place to really streamline things. So, a bit of an increase now and through 2021 and then I think it will start to flatten out to be honest.

That’s great color. Thanks.

Thanks and congrats again guys on solid execution. And I will jump back into queue.

Thanks.

Thanks, Ahnad.

Hey, thank you. I was wondering there was a line in the MD&A that kind of mentioned that COVID could result in some potential contract delivery delays?

Do you guys expect any additional costs result in that or does your outsourced model largely protect you from any exposure there?

Hi, Nick. Yes, so one of the things that we always try and do in the MD&A is identify any potential risk to the business.

So far, knock-on wood, we have been able to steer clear of any material negative impacts from COVID on the business. It’s still out there.

It’s still circulating in the community. We all know that.

And so we are continuing our diligence to navigate around that to the best that we can. So, what I can say is that as of to-date no material negative impact.

We have got procedures and processes in place to keep the early warning system and on the lookout for anything that could impact us. And to directly answer your question, yes, we have benefited from our outsourced manufacturing approach.

That’s been helpful for us. And it’s been one of the keys to help us avoid some of the challenges there.

Okay, that’s great. Thank you.

And then just to go back to the build-own-operate model, if we could for a second, please. The conversation was about the North American market, but in Europe, can you just provide any commentary or any color as to how the SWEN relationship is developing, if there is any wins that you could foresee happening in the near-term, what’s held that back?

Has that been impacted by COVID? Any color there would be appreciated?

Sure. Yes.

The – well, firstly, the relationship with SWEN is strong, great partners, very entrepreneurial and has been great to work with. I think it is fair to say that for certain projects in earlier stages in the development process have been impacted by COVID, certainly, they were last year when we needed to go into a permit office and that permit office was closed.

It’s an obvious slowdown. And as it relates to the model, in particular, this upgrading-as-a-service, we did find that it did back us up in the sales cycle.

So whenever we talk about our sales pipeline number, the figure that’s in and around the $700 million value that does represent roughly 2 years of visibility. So, in other words, contracts that could be signed as early as next week and one that could be signed 2 years from now, when we talk about things like upgrading-as-a-service as the financial solution, that tends to focus on the latter portion in time of the sales pipeline.

So, in other words, those projects that are nearing the point when they are prepared to sign contracts, they tend to have their financing sorted and upgrading-as-a-service as a model doesn’t necessarily offer value to those customers. And that’s just fine.

So, that’s given us a tool to be able to focus in on some of those longer term opportunities that might take a bit more time to germinate. But to the degree that we can offer something creative that does unlock some projects, then we will do that.

Lastly, I’ll say on that model, we know it’s not the silver bullet, we are not pretending like it is. It is a unique solution that will provide value in certain situations, but we know every single time projects do require an amount of funding that covers the entire project and that’s not how upgrading-as-a-service has been designed.

It is specific to cover the scope of the upgrade or itself and not necessarily cost such as if there is a anaerobic digester that’s required on site. And that’s why we have taken a slightly different approach for the North American market to focus on deploying development capital to help accelerate those projects to get to that ready-for-construction phase, at which time those large pools of project financing can come into the picture.

That’s great. Thank you very much.

That’s it for me.

Hi, all. Congrats on the great quarter here.

Thanks, Devin.

Just to comment a little bit on if you are experiencing or beginning to see any inflationary pressures in your supply chain, I guess specifically related to your equipment components?

Yes. Well, I think I mean, we are having some visibility to that.

What’s important to note in our model is with our outsourced manufacturing approach, we aren’t in a situation, where for example, we buy or we would be forced to sign a contract with a customer and then some later point be forced to buy some raw materials that since we signed the contract has appreciated in cost, that’s not really our model. What typically happens for us is once we sign a contract with a customer then we have contracts that grow shortly thereafter to lock in our costs.

So, we are in a pretty good situation the way we manage our global supply chain to be able to not be exposed to those kind of challenges. Now that said, if there is other material costs that are outside our control, we just have to price that in.

And that’s for – we are trying to overall reduce prices for everyone in the marketplace and the way we do that is through our global supply chain and continuing to look for the best cost quality and delivery from each of our supply chain partners. So, that’s kind of how we are managing that situation.

Okay, that’s great. I guess also, just this quarter here, like revenue was, seem to be quite a bit stronger than expectations here, was it largely like the piece of work in the quarter as expected or did some revenue, maybe get pulled forward from Q2, or beyond?

I will take this Brad.

Yes, go ahead Lynda.

Yes, to be honest, it was very much in line with our expectations. We do as part of accounting for revenue recognition, we have to model things out across the entire project, and everything was really tracking exactly where we were expecting to be.

Obviously, we had, the contract win in December, and a couple of contract wins in January, announced in February that have definitely impacted the bottom line for revenue, but generally, it was all in line with our expectations.

Okay. That’s very helpful.

Thanks again for taking my questions here and again congrats on the great quarter.

Thanks, Devin.

Hi guys. Thanks for taking my question.

Just on revisiting the system sales versus aftercare services in the revenue breakdown, obviously, aftercare services is shrinking as a percentage of sales, but it’s also shrinking in raw dollars, I guess, maybe a couple 100K quarter-over-quarter if I recall. Is there any insight into how we should expect this ratio to move based on the nature of the current backlog?

Is Q1 indicative of an annualized number that we should think about for 2021 or just how do you see that maybe?

Yes. I will take this one again, Brad.

Yes, so obviously, our aftercare was $637,000 for the quarter, a little bit – it was in line with our expectations. But a little bit lower, just we did see a little bit of COVID, affecting across the UK with just the delay with getting out to sites, but nothing really that significant.

And so I would say that, it’s maybe slightly higher would be our long-term trajectory for the rest of 2021. And then I think we have talked about before that we do expect that number to start growing, there is just a time lag is obviously we put the new contracts in place, or we deliver in the up-graders and then we put new contracts – new service contracts in place after that.

So, I would expect you to start to see the impact of the increased revenue, will start to affect the aftercare in future years, for sure.

Okay, that’s good color. Thank you.

As you guys move in to more and more different geographic jurisdictions. How are you guys managing kind of the FX potential risks?

Are you mostly doing business across all like how much FX risk would there be in new contracts in new countries, how of its pricing U.S. or Canadian dollars?

Yes. I mean a large number of our contracts are U.S.

dollars and quite a lot of our revenue U.S. dollars.

So it’s really just sort of the margin that’s really is the exposure for us. And then obviously we announced the new contract win in Spain earlier in Q2.

So most of the contract would obviously we tie-in make sure that we have touched in euros to again eliminate some of that FX risk. So we try where possible to time for to match it is something I will continue to watch to make sure that that’s maybe the exposure for the company.

Colin, I think I would also add on that point. As it related to our global supply chain, we do have suppliers for certain geographies, so that’s another tool to make sure we manage the FX.

Okay, perfect. That’s good color also.

And just on the use of proceeds of the financing earlier in the year, you haven’t deployed too much of it. And you talked quite a bit about kind of the strategy around the development component, which was like around $8 million.

And then the strategic growth initiatives, another $8 million. Is there any kind of internal thought as to how quickly that like would do you see that, like 70% of that being deployed in 2021 or is there any kind of goals or targets related to those two components of the use of proceeds that we can model?

Well, we haven’t really said specifically and timeframes. So I guess I can say, watch this space, we will announce things as we announce them.

I think one thing to consider in this space, especially strategic initiatives, like M&As, obviously that’s going to be lumpy and deal specific. And, the amount is TBD.

We talked about today in terms of deploying development capital, and that’s going to be a function of how quickly we are able to germinate a pipeline of opportunities there. The pipeline of opportunities there will really come from our broader pipeline of visibility to upgrade ourselves.

So, I think what we are saying is we are now getting aggressive on the development capital side, because we see that as a great opportunity for us. We are focused on the M&A whereas previously we have not been because we have been focused on the core business.

But in terms of giving you exact timeframe as to when cash might be out the door, or expenses made, that’s not something we are really in a good position to give you guidance on.

Yes, I appreciate that. Thanks.

Anyway, I just wanted to check in, see if it could be – if it’s kind of this year thing. But that’s all for me.

Thanks, guys and congrats on the quarter.

Thanks, Colin.

Good afternoon all. Just a couple of random questions.

On the backlog side, I know there is still some subjectivities in there, but the $38 million plus the $6 million that was awarded in April, how much of that do you think it’s executed in 2021 versus 2022?

Do you want to take that one, Lynda?

Yes, sorry. I was just going off mute.

Yes, I mean, typically, we will say that as contracts are awarded, we recognize them in revenue over 9 months to 18 months period. And so I would expect a large part of that will be recognized through 2021.

It’s difficult for me to give any sort of greater projections on that, so we don’t obviously give revenue forecasts. But no, I would use that as a guide really like looking at the 9 months to 18 month period for using up the backlog.

And so when you look at the project sequencing, was there any lumpiness in Q1 that I know it was – the question was asked earlier about pull forward, but is there any lumpiness in Q1 that could impact the throughput of your backlog in Q2?

I wouldn’t, necessarily lumpiness, I mean we obviously, a big one is we announced large contracts for the – in California back in late June, I think it was early July that obviously, we are seeing the benefit of that contract and the $10 million contract from December. So obviously, we get, as we go through the year, those contracts are being realized, and we are advancing the project.

So we are getting the benefit of the revenue from those. But there is not a specific lumpiness other than obviously as those projects get completed, obviously, they will start to tail off.

And we expect new projects to come into replace them.

Okay, so even though 80% give or take of the revenue in Q1 was from three customers. There is a reasonable follow-on there in terms of call your momentum you are seeing or expecting?

Yes, agreed.

Okay. And the sales pipeline, the $715 million of sales pipeline, what’s your best guess of how much of that potentially moves to an award phase in 2021?

That’s a trick question. And you are not going to cause us to answer that one, Jeff?

Well, we don’t give guidance right, on revenue for the year. And that’s related to, to when we might secure new contracts.

What we can say is, it’s our core business to be getting new contracts. And everything we have visibility to, in the near-term is sitting in that that pipeline.

And that is a dynamic thing that as men, projects, obviously, they come out of the pipeline, and into the backlog. And as we have visibility to new ones that we are recording, they go into that number.

So, what I can say is, obviously, when we do sign the new contracts, they get released right away. And related to your first question, Jeff, which we have talked about before, and it’s a really important point, is, rather than looking at the sales or backlog as just one big lump number, it really has the nuance of building that up on a project by project basis.

So in other words, when we announced our new contracts, we try and give the color that we can in terms of when the work will start, the timeframe over which that will happen. And then it’s with the number of contracts that are announced to build up that that model to show roughly when the revenues will migrate or sorry, when the amounts will migrate to the revenue line.

Sorry, let me simplify the sales pipeline question. And so you have talked about how $715 million is about 24 months out of opportunities.

So, do you see that $715 million being more weighted to the 24 months period, versus the 12 months period?

Well, that, I know what you are asking. I am not sure that’s quite the right lens to look at it because there is other dimensions to it is, is really to, there is increasing confidence that happens over time with these projects.

Some projects don’t proceed, because the project developer may have encountered a hurdle or delay of some kind. There is – so there is really the increase in confidence.

And that’s really the way to think about our sales pipeline, is we and our sales process, look to move the highest quality opportunities through the process through our funneling process, ultimately, to sign a contract and move it into the order backlog. So yes, I can’t really give you an answer to your direct question of what’s the waiting on the near-term or later-term?

There is just a lot of moving parts in the pipeline process.

Okay, last question. The headcount, so you said you were 55 at the end of Q1, where do you expect your headcount to move to this year?

I will take that one.

Yes. Go ahead Lynda.

No, I was just going to say I mean, as I was saying earlier, we are all growing. We are growing our revenue and we are growing our staff.

I do expect that number to increase a bit through 2021. And then I would expect it to start leveling off a bit.

So, it’s difficult to sort of say, at this stage exactly what we expect that number to be. But I would expect potentially, like a sort of 20% growth in staff in the next little while just to support those numbers, to support the continued growth of the business.

Yes. I guess I would add to that Jeff, just the way that we have architected the business in terms of the outsourced manufacturing.

We do also rely on some trusted outsource partners on the engineering side. And that’s helpful, as certain specialized items come up, or we want to ramp quickly, which we are ramping quickly right now, is to make that balance between growing our internal staff and relying on our partners.

So, right now we are, as Lynda mentioned, our focus on growing our internal staff going quickly. And that the general rate of G&A growth is much slower than the general rate of the revenue line, and hence why we have seen in the last few quarters, the flip from EBITDA negative to EBITDA positive in the last few quarters, because that leverage effect of taking the gross margin is down to the bottom line.

Great. Thank you.

I appreciate the color.

Hi, Brad. I was wondering, you used the term highest quality prospects in the pipeline?

What constitutes, can you contrast like a high quality prospect like something that you are looking at that you think will move into the backlog? What does it look like?

Yes. Hi Mac.

And that is a good question. So, I would say the highest quality ones are where the customer likes Greenlane the best.

But it’s also the ones where we can get some insight into the project activity. So these are things like, are there barriers on permitting.

Is the land all secured for putting the systems in place. Dose the developer have development capital, yes or no, hence tying it back to our previous discussion around deployment of development capital.

So, we have quite sophisticated series of judging criteria in our sales pipeline that allow us to make some assessments of the quality of each of these jobs and kind of get a sense as to which ones we think if we put our muscle behind that we could help move closer to the signing contract stage.

Okay. So when you look at the pipeline, and you see how it evolves and how projects move through that into the backlog?

Could you like – could you rank or what factors seem to impact that the most? Like, is it finance availability, is it just natural gas prices, is it some sort of regulatory issue or the type of technology that they will likely use?

What affects the process the most?

Yes. I mean, you have mentioned a few items that may or may not impact the process.

So things like, the regulatory frameworks that exist, those are macros that tend not to have a direct influence on kind of the micro activities at the project level, because people were – are relying on those fundamental mechanisms being in place to be able to secure off-take contracts with the likes of the oil and gas guys, or any of those that would take the optics, or it could also be a gas utility. So that that sort of thing, in terms of a macro tends not to influence but certainly things like, has the developers secured that contract, yes or no.

That’s a big determinant, because that will drive the revenue for the project and have a negotiated price. That’s right, for that particular project.

You mentioned another one is the technology selection, does that come into it. Yes, it does, in fact, and that’s one of the fundamental reasons why we have positioned Greenlane to be the only one in the marketplace to offer multiple core technologies.

So it is, we do see that from time to time that projects as they work their way through the development cycle, that things can change. Things can say, well, we initially started with a PSA technology, but now that lends itself to water wash or our membrane or there is just a switch.

In our case, that means that the developer doesn’t have to move away from Greenlane, we can just record a different system for them. Lastly, I will say that yes, we do see development capital, being a pretty significant component of that, that’s pretty binary.

If a developer simply runs out of money, then that stalled the project. And that’s one of the things that, that we have recognized that if we are able to help facilitate that component, and hence why we have been talking today about starting to deploy development capital, then we can un-stick projects that might otherwise be stuck.

At least Lynda, hand there.

And it sounds beyond that, beyond the finance portion of it? Do you typically get active like when you are looking at the project and evaluating it?

And you are saying, like, why is this thing not going forward? Do you actually – can you be instrumental like you would give an example with finance you might be on the other things like regulatory or on like the technology that can you actually go in and say, look, we can get – help these guys walk down and off take and get this thing going forward?

If we went in there and work closely on that process, do you actually do that?

What we do, in fact, and there is a number of things we have done in that regard. One is that we launched something we call the Integrated Biogas Alliance.

We launched that in December of 2019, deliberately to bring other elements of the value chain of any biogas projects that Greenlane may not offer, just what the biogas upgrading systems. So, there is a number of partners within that, that collaboration, and it can bring incremental value.

We also have, obviously, a network of relationships throughout the industry. So, if it’s your example of off-take, and the developers struggling there, we can certainly make the right introductions at the right time to bring those partners to the table.

So, those are in technology, I mean I already commented on that. But I think the number one thing that obviously gets us into a position to be of assistance and to help accelerate projects is the development capital.

And that’s why we settled on that model, and why we are forging ahead in that specific area.

Okay, great. Thanks, guys.

Thanks Mac.

Again, myself to tick off mute. Thanks very much everyone for participating on today’s call.

We appreciate your questions, as well as your ongoing interest and support and look forward to seeing you on the next conference call. This concludes our conference call for today.