Tantalus Systems Holding Inc. Reports Financial Results for Q2 2021

Tantalus News

Delivers 18th Consecutive Quarter of Positive Adjusted EBITDA

Burnaby, BC – August 16, 2021 – Smart grid technology leader Tantalus Systems Holding Inc. (TSX: GRID) (“Tantalus” or the “Company”) today announced the financial results for the second quarter, ended June 30th, 2021.

The Company witnessed favorable trends throughout Q2 as the utility industry continues to recover from disruptions resulting from the COVID-19 pandemic. The favorable trends translated into strong financial results for Q2 including revenue growth of 3% year-over-year and an 18th consecutive quarter of delivering positive Adjusted EBITDA.  The Company also added an additional 6 utilities to its user community within the quarter, bringing the total number of new utility customers to 11 through the first six months of 2021. The financial and commercial results delivered during Q2 2021 bode well for the Company and demonstrate management’s ability to continue to navigate through unforeseen challenges at a macro-level.

“We are pleased with the positive momentum that continues to build in our sector given the impact extreme weather, calls for decarbonization and changing consumer expectations are having on the utility industry. With the closing of our recent financing announced on August 12th of this year, our balance sheet has never been stronger and will enable us to actively pursue our multi-pronged growth strategy to support public power and electric cooperative utilities,” said Peter Londa, President and CEO of Tantalus. “While COVID-19 and the global supply constraints of semiconductors and electronic components are impacting our entire industry, we remain confident that Tantalus is well positioned to continue to expand our user community through customer acquisition and deliver next-generation smart grid solutions with predictive analytics to help build sustainable utilities.”

Q2, 2021 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 reported of US$8.0 million compared to US$7.8 million, representing approximately 3% growth year-over-year.
  • Gross Profit was consistent with the previous year at US$3.8 million. Gross Profit margin decreased to 47% from 49% due to the product mix of connected devices and revenue contribution from utility software applications and services.  See “Non-IFRS Measures”.
  • Operating Expenses for the three months ended June 30, 2021 increased to US$3.7 million versus US$3.1 million. The increase in Operating Expenses is predominantly attributable to expenses associated with becoming a publicly-traded company, the Company’s loss of access to the Canadian government’s research and development assistance program referred to as the Scientific Research and Experimental Development (“SR&ED”) program made available to Canadian-Controlled private companies and the strengthening of the Canadian dollar relative to the United States dollar. 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$3.7 million versus US$3.3 million dollars for the three months ended June 30, 2021.
  • Adjusted EBITDA decreased to US$65,475 versus US$737,665. The decline in Adjusted EBITDA was predominantly tied to the loss of the SR&ED program in conjunction with becoming a publicly-traded company as well as additional costs incurred with its going public transaction in January 2021. See “Non-IFRS Measures”.
  • Research and development (“R&D”) investments increased to US$1.5 million versus US$1.0 million. When adjusting the R&D expense for the loss of SR&ED credits on a comparative basis, the investment in R&D for the period was US$1.5M versus US$1.2M for the three months ended June 30, 2021.
  • Increased customer base to over 195 with the addition of 6 new utilities during Q2 2021 and a total of 11 new utilities for the six months of 2021.
  • Completed a CND$10.6M overnight-marketed financing which strengthens its balance sheet and positions the company for additional organic opportunities as well as strategic partnerships and M&A opportunities.
  • Reported 18th consecutive quarter of positive Adjusted EBITDA.
  • Cash position at June 30, 2021 of US$10.7 million compared to cash of US$4.6 million as at December 31, 2020.  Post financing August 12th, 2021 cash position of approximately US$16.30 million.
  • The Company had total assets of US$29.9 million as at June 30, 2021 compared to US$23.5 million as at December 31, 2020, with Adjusted Working Capital as at June 30, 2021 of US$9.1 million compared to Adjusted Working Capital of US$3.5 million as at December 31, 2020.  See “Non-IFRS Measures”.
  • On May 10, 2021 the Company graduated to the TSX from the TSX-V.

While the growth horizon remains favorable for Tantalus and is being bolstered by the unprecedented stimulus packages in the United States centered on infrastructure upgrades and grid resiliency for the utility industry, management is mindful of the continuing impact resulting from the COVID-19 pandemic and 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, delays in decision-making by utilities that are assessing modernization plans and disruptions to the global logistics and overall supply chain production. The worldwide shortage in semiconductors is leading to extended lead times, factory disruptions, raw material shortages and logistics constraints.

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.

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 six months ended June 30th, 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.

About Tantalus

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.

Contact Tantalus:
Jacquie Hudson
Marketing Communications Manager
Tantalus Systems Inc.
613-552-4244 | jhudson@tantalus.com

Investor Relations:
Linda Armstrong
Investor Relations
647-456-9223 | larmstrong@tantalus.com

Non-IFRS Measures

The preceding discussion of financial results includes reference to Gross Profit, 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 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.

Forward Looking Statements:

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: our balance sheet has never been stronger and will enable us to actively pursue our multi-pronged growth strategy to support public power and electric cooperative utilities, Tantalus is well positioned to continue to expand our user community through customer acquisition and deliver next-generation smart grid solutions with predictive analytics to help build sustainable utilities; the overnight-marketed financing which strengthens its balance sheet and positions the Company for additional organic opportunities as well as strategic partnerships and M&A opportunities; the adoption and development of new products and offerings, the ability to attract customers accessing government stimulus funding, the impact of 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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