Xebec Adsorption (TSX: XBC) this morning cut guidance for fiscal 2020, as a result of its current process of “finalizing financial results.” The company had previously guided to revenues between $70 million and $80 million, with guidance now cut to just $57 million, which represents an 18.6% decline on the low end of guidance, and an 28.8% decline on the high end.
The cut to guidance is not the first made by the company for the fiscal year, with revenue guidance initially pegged between $80 to $90 million. The company had originally guidance towards positive net earnings between 7 and 9% along with EBITDA margins between 11 and 13%. Following the second quarter, guidance for earnings and EBITDA were reduced simply to “positive.” After the third quarter, revenue guidance was reduced, as well as any hope of positive earnings or EBITDA was eliminated.
Fast forward to today, and the company has now guided towards gross margins between negative $1.0 million and positive $1.0 million. SG&A expenses meanwhile are slated to be between $15 and $16 million, pointing to a strongly negative quarter.
Justification for the reduced revenue expectations include:
- A $5.6 million impact on revenue related to a detailed review of fix priced contracts for renewable natural gas products. Previously positive contracts are now expected to be negative in margins, while previously recognized revenue is expected to be rolled back due to project completion timelines.
- $5.4 million in revenues are to be clawed back due to the cancellation of the sale of two systems for which 50% of revenue was already recognized.
- $1.9 million rollback in revenues as a result of the deteriorating financial position of a client where collection is now uncertain.
Full financial results are to be released March 25, 2021, before market open.
Xebec Adsorption last traded at $7.94 on the TSX.
Information for this briefing was found via Sedar and Xebec Absorption Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
