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Hello, everyone, and welcome to Xebec's First Quarter 2021 Investor Webinar. My name is Brandon Chow, and I'm the Director of IR at Xebec. I'd like to remind everyone that this webinar is going to be recorded and will be made available in the Investors section of our website later today. Please note that we will open the floor to questions after the conclusion of the presentation. [Operator Instructions] Joining me today will be our President and Chief Executive Officer, Kurt Sorschak; and our Chief Financial Officer, Stephane Archambault. Our earnings press release was issued earlier today before market opened. All relevant documents are available for download either from the Investors section on our website or from SEDAR directly. You'll also find later today a copy of today's slide deck on our website's Investors section. During this call, we will make forward-looking statements about our future financial performance and other financial events and trends including guidance. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could affect our financial results and the performance of our business, which we discuss in detail in our filings, including today's earnings press release. Xebec assumes no obligation to update any forward-looking statements we may make on today's call. There may also be references to certain non-IFRS measures, such as EBITDA, adjusted EBITDA, backlog and quote log. These non-IFRS measures are not recognized measures under International Financial Reporting Standards and do not have standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other companies. With this, I turn it over to Kurt. Kurt, you're currently muted.
Sorry. So thank you, Brandon. Good morning, and welcome, everyone, to Xebec's First Quarter 2021 Investor Webinar. In Q1, we continue to work through a number of challenging contracts, and I can report that we've made some significant progress, which will allow us to turn in much stronger quarters going forward. Xebec was able to post its best revenue quarter ever, and we saw improvements to our gross margins despite a number of 0 margin projects going through our factory in Blainville. This quarter shows that we are not only recovering from the recent extraordinary events, but that we are on track to achieve significant growth this year. Part of the reason that the gross margin improved over last quarter is due to the fact that we processed many more profitable contracts, plus we saw the first revenue contributions from HyGear and Inmatec in the quarter. We expect that these 2 strategic acquisitions will help us not only to execute on our distributed gas generation strategy but also significantly contribute to the success and profitability of our company going forward. Overall, we are seeing very positive developments for the industry and strong indications that we are at the beginning of a significant economic upturn. This, coupled with the accelerated decarbonization targets that some of the world's largest economies have announced, we remain very positive about the outlook for Xebec. Activity in the renewable natural gas and hydrogen space remains strong and Xebec is well positioned to participate in the growth of these industries. For example, we've counted over 100 high-profile transactions, investments and project announcements to date in 2021 alone, a significant uptick from previous years. Furthermore, there is a supply-and-demand imbalance for RNG in North America, which will continue to drive the price of our renewable natural gas and stimulate project development activities. Xebec is well capitalized. Our markets continue to grow and unforeseen opportunities continue to emerge as we move towards a lower carbon future. We have a wide variety of technologies and products that will help us become a leader in on-site generation of low carbon gases for industrial and mobility markets. With this, I'll turn it over to Stephane Archambault, our CFO, who will go over the financial highlights. Stephane, please?
Thank you, Kurt, and welcome, everyone, joining us. Let me start by reviewing our consolidated financial results for Q1 2021. We achieved revenues of $20.6 million in the first quarter of 2021 compared to $12.2 million for the same period in 2020, a 69% increase. The increase is mainly explained by the acquisition we completed in 2020 and 2021, which includes $4.7 million in revenue for the service companies and $5.5 million in revenues for HyGear and Inmatec. Our gross margin was for the first quarter of 2021 compare -- $4.2 million for the first quarter of 2021 compared to $3.1 million for the same period in 2020. The gross margin percentage decrease from 25% to 20% is mainly due to lower margins for the company's renewable natural gas projects. Selling and administrative expenses were $10.9 million for the first quarter compared to $3.8 million for the same period in 2020, a 187% increase. The increase is primarily due to additional SG&A expenses associated to the newly acquired companies. Firstly, $1.5 million was associated with the service companies and ACS, and $3.1 million for HyGear and Inmatec. In addition, $1 million was attributed to transaction and integration expenses related to the newly acquired companies. Finally, SG&A expenses increased due to an organizational scale up of employees and associated costs to support the increased level of business. We expect that future quarters, the SG&A as a percentage of revenues will be smaller. We had a negative adjusted EBITDA at $5.8 million for the first quarter compared to positive adjusted EBITDA of $0.5 million for the same period in 2020. Net loss for the quarter was 9.8 -- $9.2 million or $0.06 per share compared to a net loss of net $0.7 million or $0.01 per share for the same period. Lastly, we ended the quarter with working capital amounting to $129.4 million as at March 31, 2021, compared with working capital of $171.1 million on December 31, 2020. The decrease is mainly due to the cash used for the acquisition of Inmatec. We have $108.5 million of cash as at March 31, 2021. This cash position and low debt load continue to give us a strong financial position and flexibility to maneuver the current environment and continue taking advantage of opportunities. Next, I'd like to show you our quarterly financial trends. Q1 showed an improvement over Q4 as we get back on track to deliver revenue growth and improve our profitability. While the extraordinary event we experienced in Q4 were unfortunate, we believe these to be temporary and the diversified nature of our business and strategy to focus on higher margin services will reward shareholders in the long term. As Kurt mentioned earlier, we continue to maintain our 2021 guidance. With this, I'll turn it over to Kurt to go over our business segments.
Thank you, Stephane. And let me bring you through our business segments now. As a quick reminder for those who are not familiar with Xebec, we have 3 core segments, which include our Cleantech Systems, our Industrial Service and Support and our Renewable Gas Infrastructure segment. As you can see, there are activities all intersect with each other, and this creates great synergies within our business. We are continuing our transition to more services as we respond to evolving customer needs, particularly in the hydrogen industry. I'd like to remind everyone that we have added HyGear and the hydrogen generation products into the Cleantech Systems segment, and we have integrated Inmatec and the oxygen and nitrogen generators into the industrial support segment. So let's take a look at our cleantech segment here. In our cleantech segment, we continue to work through the remaining unprofitable RNG contracts. We expect to still see some limited impact on those projects on Q2. But beyond that, renewable natural gas contracts will normalize towards their historical levels. We've adjusted our terms and conditions for the renewable gas contracts to better reflect the risk, and particularly, associated with the installation cost. And we adjusted our pricing to better reflect the price pressures we are currently seeing in the market. What is exciting to see is how our containerized Biostream upgrading system is gaining market recognition. And consequently, because of that market recognition, we are ramping up our production capacity in anticipation of increased customer demand. We currently have 11 units in production, and we believe that we will see significant sales traction for this product going forward. We already have 2 units in operation in California and Idaho and -- that are producing renewable natural gas with another 4 Biostream units being delivered in the next few months. In order to increase our production capacity for Biostream products, we identified the need to create additional production space. And this, in part, is the reason for the recent acquisition of Nortec in Tennessee, which will allow us to move our dehydration products, in other words, all our air dryers, gas fryers, hydrogen dryers, down into the Tennessee facility. The hydrogen activity continues to be robust as there are a number of high-profile projects and partnerships that we have announced to date. We are happy to be working with Coregas, which is a Wesfarmers company and one of Australia's largest industrial gas companies to develop local and New Zealand-based hydrogen ecosystems. We also signed a similar partnership with OmAir in India to develop hydrogen ecosystem there and to leverage their customer network and their over 50 hydrogen trailers. We are also participating in some very exciting development work, and we will be making announcements in this regard over the coming weeks and months. We continue to build partnerships, both on the RNG side and the hydrogen side, and we will provide a more detailed update once we roll out our decentralized hydrogen production hub strategy later this year. Next, I'd like to go over our industrial segment. This segment is actually performing very well. We saw a significant year-over-year revenue growth with 161% and solid gross margin generation. The growth in this segment is a function of both recent acquisitions and organic growth, which has been driving -- which we have been driving through synergies and cross-selling. What I would like to point out here is the fact that very little of that revenue in that segment actually is reflected in our order backlog. 60% to 65% of the sales in this segment are service and support revenues, which are short term, and they never make it into our backlog numbers. What is encouraging to observe is the margin improvements we are seeing in that segment. And we will continue driving that margin from about 35% to the 40%-plus range as we start creating more synergies within the network. This segment is key to supporting our cleantech system sales because our cleantech system customers want to have local service and support, operation and maintenance. We continue to target about 30 acquisitions by 2025. Those acquisitions should generate about $250 million in revenue by 2025, and we expect to be closing several more acquisitions later this year. On May 3, we announced the acquisition of Nortec, which is more of a strategic acquisition for us basically to increase our U.S. manufacturing capacity and more importantly, to open up manufacturing capacity for our Biostream systems in our Quebec facility. Nortec will become our center of excellence for our dehydration products, which primarily consists of air, gas and hydrogen dryers. The U.S. location is also important as we anticipate more regulation and local sourcing requirements in the U.S. as many U.S. companies and government agencies focus more on Buy American policies. So I think that will serve us very well as we move forward. It's a great company, has great customer relationships as they are, and our business is already really growing nicely even though we've just acquired the company. Now I'd like to draw your attention to Inmatec, which in itself is a great success story for us by achieving record sales and deliveries. Unfortunately, because of the COVID situation, we are selling a record number of oxygen generators worldwide. The business is performing significantly above our expectations. And we are providing products to countries like India, who have been particularly hard-hit and continue to be a large customer of ours as they try to get their hands around this unfortunate disease. Our teams in Germany are working around the clock to basically do everything to get those vital oxygen generators to hospitals throughout India, South Asia and Africa. We continue to receive follow-on orders from customers. And just last week, for example, we received our single largest oxygen generator order for 41 units from India. Strong order bookings are expected throughout the year, and we are in the process of expanding our production capacity in Germany as well because we can't keep up with the demand at this point.Finally, I would like to mention that in April, Peter Biedenkopf joined Inmatec, joined us as the General Manager for Inmatec. Peter has over 24 years of experience in the industry. He holds a doctorate in chemistry. He's worked for Daimler, Deutsche Bank, Linde Gas and a number of medium-sized businesses in Germany. He will be responsible to grow the traditional business of Inmatec, which is oxygen and nitrogen generators. But he is also tasked to explore and expand into hydrogen and renewable natural gas in Germany, Austria and Switzerland. Next, I'd like to show you a project we've been working on and -- which was just commissioned a couple of weeks back. Many of you might not know that the technology we have is suitable for the purification and separation of a number of different gases. As such, we were part of the largest helium purification project in Canada in Saskatchewan. It's a $32 million project. As I mentioned, the facility was commissioned a couple of weeks ago, and our technology is a core part of the project as we ensure that the helium is being purified to a level so that it can be used for industrial use. Helium, you might not know, is a very important gas, which is used in MRI machines, fiber optics, cell phones, computer chips, hard drives and other things. The project is selling about $1 million worth of helium a month. And new project opportunities are developing worldwide basically. But in particular, in North America, helium prices have gone through the roof. There are approximately 20 projects active at the moment or are in active development, and we are in the process of forming partnerships with a number of those developers. I would like to congratulate our partners and our team for making this exciting project a reality. I think that is something we can be really proud of. It's the largest project in Canada and one of the largest in North America.Next, I would like to talk a little bit about our renewable gas infrastructure segment. Which has been rolled into a Quebec fund, called GNR Quebec Capital or known as GNRQC. The pipeline the team is building is quite strong and robust. We have over 20 projects that are being evaluated at the moment. And the objective is to complete several of those or to make investments into several of those projects. Quebec remains a favorable jurisdiction for us to invest into these types of projects. And obviously, we have the advantage of being a local company that can provide local service and support. Let me remind you that these infrastructure projects typically take several years to develop, and we do not expect to realize any investment gains or losses from this activity in 2021. But as the activity in this segment increases and as the projects come online, we will be able to provide equipment to those projects, provide services and operations to those projects, which will obviously positively impact us. Finally, I would like to leave you with the last slide, which summarizes our management guidance for 2021. Our guidance remains unchanged from the last one we provided with our Q4 results. We expect to continue -- actually to accelerate our revenue growth and return to positive adjusted EBITDA. Given the current order backlog of $88.5 million -- and please remember, again, that most of the revenue that is in the industrial service network is not reflected in that backlog. Including also the revenues of HyGear and Inmatec, we expect to be making in 2021 revenues in the range of $110 million to $130 million. So future quarters should see a significant step-up to Q1. And we expect EBITDA margins to be -- adjusted EBITDA margins to be in the 3% to 4% range as we've been guiding earlier. 2021 is shaping up to be an exciting year for us. We are seeing great traction on the hydrogen side. We are seeing great traction on the oxygen and nitrogen side. RNG, with our Biostream units, looks very, very strong. I hope to be providing some more significant update as we move forward. We will continue to execute as a more diversified and scalable company with exposure to multiple markets for our low carbon gases. With that, I'll turn it back to Brandon for the Q&A. Thank you.
Thank you, Kurt. [Operator Instructions] Our first question comes from [ Randy ] and a couple of other investors. When do you expect to have a new COO?
We will be announcing our new COO next week.
Perfect. Thank you, Kurt. Our next question comes from [ David ]. What is the production capacity for the BGX Biostream before and after the Nortec acquisition after the manufacturing floor space is freed up in Blainville?
Currently, our capacity is 1 Biostream every 5 weeks. That capacity will be increased to 2 Biostreams every 4 weeks by August. And by early next year, our capacity will be 4 Biostreams every 4 weeks. So a significant capacity expansion over the next basically 8 months.
Thank you, Kurt. Our next question comes from Aaron MacNeil from TD Securities. On the 11 BGX Biostream units you're building to meet demand, are these 11 units in the backlog? And do you have contracts associated with these units? Or are you building them in anticipation of future awards?
We have contracts for 4 of those units. The rest is being produced into inventory for short delivery times. So we expect to be announcing some orders shortly on future Biostreams, and we will have a shorter delivery time because we all will be working on those.
Thank you, Kurt. Our next question comes from [ Amar ]. Can you talk about the extreme shortage of oxygen in India? And how this has impacted Xebec?
Well, it has impacted us in as far as we are working at capacity at Inmatec at the moment. There's so much demand for oxygen generators that it's hard to keep up. We are also seeing some supply constraints, which we are working to resolve because the demand is significantly higher than what we can supply at the moment. I've mentioned in the script that I went through the expanding capacity also in Inmatec to be able to increase our capacity by about 1/3. And that should be achieved by the end of next month. We should have a significantly higher capacity there as well. So Inmatec will be a great success story for us this year. Their revenues will expand significantly.
Thank you, Kurt. Our next question comes from Eric Stein from Craig-Hallum. Can you give some more details on the order pipeline, including the total and active number of quotes?
So we've provided numbers for the backlog. And obviously, as the previous question was asked, the units we are producing into inventory, they are not in our order backlog. They are not in our order backlog. Our quote log remains strong. It's about the same as the last time I reported on it. There's not much change to this. The renewable natural gas activity in North America continues to be extremely strong with a record number of projects being kicked off. In Europe, I think we are seeing more on the hydrogen side than we are seeing on the renewable natural gas side.
Thank you, Kurt. Our next question comes from [ Lars ]. Does the $250 million forecasted for 2025 only include service revenues? Or are other revenues associated in that figure?
Which revenue number did you mention, Brandon?
The $250 million revenue target.
That is basically -- this number comprises the revenue in the industrial segment. It comprises all the 30 service company revenues, not necessarily the Inmatec or Nortec revenues.
Thank you, Kurt. Our next question comes from Eric again from Craig-Hallum. Can you talk about how we should think about the OpEx? And what were the onetime items? And what is a reasonable run rate going forward?
Stephane, you want to take that?
Absolutely. So yes, we are -- as I mentioned, we are incurring some integration and transaction expenses. These are unusually high because of the nature of the 2 acquisitions that we made. This will continue this year because we still have some work in front of us to complete. However, in the future, I foresee these numbers to go down. But there will -- as we are still acquiring companies, as Kurt just mentioned, we will still have some transaction expenses in the future but, as I said, to a much lesser level unless we do a major acquisition. In this case then, we would have some significant transaction expenses.
Thank you, Stephane. Our next question comes from [ Alan Richardson ] at Echelon. Given your guidance for 2021 and your revenues for Q1 2021, what are your projections for quarterly revenues for the balance of the year?
Well, I think that's easily done. You take the remainder, but -- and divide it by 3. So our revenues will be in the $30 million range per quarter.
Our next question comes from Rupert Merer from National Bank. How long before you make significant investments into ownership of infrastructure? With a 3 to 4 year development horizon for infrastructure projects, could you buy advanced developments with shorter times to construction? Or will you focus on greenfield development?
We are looking at all times all kinds of developments. At the moment -- and I'm reviewing the pipeline on a regular basis, there are 2 projects that we think will be ready for investment relatively soon, and both are greenfield investments. But we are also looking at already existing facilities that might need additional investment either to improve performance or to expand. And that is also on the go. I mean there's a -- the team in GNR Quebec Capital has a broad mandate to look at those opportunities. But to answer, the first 2, I expect to be greenfield developments.
Thank you, Kurt. We have another follow-up question from Rupert. Can you talk a bit more about the manufacturing capacity that we expect to have for the BGX Biostream and the amount of dollars associated with that?
Yes. So as I said, 1 every 5 weeks at the moment, expanding to 2 by August and then to 4 early next year. That means that this year, we have a capacity of about 10 to 12 Biostreams. And next year, our capacity will be in the 40 range, so 35 to 40 Biostreams. Those Biostreams, depending on the configuration, have a price between $1.5 million and $1.7 million. So that gives you an idea of the revenue we're intending to push there.
Thank you, Kurt. Our next question comes from [ Xavier ]. How many acquisitions do you expect to finalize during 2021?
We have a robust pipeline of acquisition. So there's -- there are actually more acquisitions in our pipeline now than we can actually execute. Our target would be to conclude at least 3 to 4 more this year. And we have 3 basically in a very advanced stage.
Thank you, Kurt. Our next question comes from Aaron Spychalla from Craig-Hallum. Can you provide a breakout of organic versus inorganic growth year-over-year in the service segment?
Stephane, you want to take this?
Yes. I mean we do see about a 10% organic growth for the existing business that we have. And -- but obviously, we know we'll be the target of making 3 to 5 acquisitions a year. That will certainly have a major impact. But for us, internally, we're looking at a 10% -- around 10% increase organically.
Yes. So let me add here. I believe that the organic growth will accelerate this year and going forward. There is an enormous amount of activity. There's also all this infrastructure investment that is coming in, which requires a lot of service from those types of companies we are buying. So I expect that we're going to see some robust organic growth over the next couple of years due to all the spending. And then combined with our acquisitions, I think we're going to be in pretty good shape. If we can streamline our supply chain for those companies -- and that's what we are working on at the moment. Because each one of those companies buys their own products from their local distributors, which they are basically using and reselling. Once we streamline the supply chain and have the frame agreements in place so that those companies can buy similar products at lower prices, you're going to also see the gross margin improvement that those companies are going to be generating.
Thank you, Stephane and Kurt. We have another follow-up question from Aaron. Any thoughts on CapEx for 2021, including expanding in the tech capacity the Blainville facility and Nortec?
Stephane?
Yes. So right now, we're looking at around $13 million to $15 million of CapEx. And this is mainly on our hydrogen business as we deploy our new systems. We do have some money slated for the Blainville activities. And at the same time, we are implementing a new ERP system, so there will be some money associated with that.
Thank you, Stephane. Our next question comes from Ahmad Shaath from Beacon Securities. How should we think about capacity in Inmatec? You previously mentioned it was operating at max capacity. When should we expect the new capacity to come online? And how much percentage are we expecting revenue from Inmatec?
Yes. So on the capacity side, obviously, you cannot expand the facility quickly or as quickly as we would need it. So what we are doing is Inmatec is producing different types of products. So they are the standard oxygen and nitrogen generators that we can immediately produce and ship and that can be installed locally into a hospital, for example. And then we have containerized systems that we are producing at Inmatec. And those containerized systems take obviously more space. They are like self-functional units. They have everything included. You just need to hook it up and those containers produce oxygen or nitrogen. Whereas the single individual unit needs to be integrated. There needs to be some local work and engineering done. So we are looking at moving some of those containerized systems to have them potentially produced at HyGear to create more production capacity at Inmatec. Plus, we are converting some of the storage, the inventory space at Inmatec into production space now. So we're moving out what is basically taken up by inventory into a different facility and start producing products there. Because the oxygen generators, in particular, it's a certified facility. So you need to have certain certifications to produce medical oxygen. You cannot produce those everywhere, so there are restrictions around that. So that is happening as we are speaking, and the team is working on that. The second part of the question, Brandon, was what?
What percentage of revenue can we expect from Inmatec this year?
Stephane, you have those numbers, I believe.
Yes, it will be around 15% to 18%.
Thank you, Kurt and Stephane. Our next question comes from David Quezada from Raymond James. You mentioned price pressures in the market. Any color you can provide there? Will you be able to pass them on fully to the customers through increased prices of the products?
Now -- and this is part of the problem we ran into. We've been seeing the price pressures for quite a bit longer than now you hear it in the press. We've been seeing price pressures build since late last year, and this is also what basically caught us off guard, to a certain extent, in particular on the installation cost, which increased like three- to fourfold to what we had budgeted. But we are not only seeing it there. We are seeing it on steel, which has increased by about 45% since November. We are seeing it on cabling, which contains copper. We are seeing it on packaging material, like wood. You have price pressures basically on every commodity we are dealing with at the moment. Absorbent as well, a significant upward price pressure. So on the existing contracts, which we have taken under fixed price, which didn't have a commodity clause in it, we were stuck with those, and we are executing on those. But for contracts we -- going forward, we are obviously integrating the new pricing, plus we are integrating commodity clauses. And one interesting fact for you all. Normally, when we quote something or when we get quotes, a quote has a validity period of normally 30 to 60 days. We are now receiving quotes that have a validity date of 2 days. It's incredible what is happening in the market space at the moment.
Thank you, Kurt. Our next question comes from Craig Irwin from ROTH Capital. How much revenue do you need to acquire to meet your 2021 guidance?
Stephane, I'll let you talk. I don't think there's any additional revenue acquired. But I'll let you answer.
No. I mean I'm not sure if -- I mean, we're -- the guidance is between $110 million and $130 million. We're at $20 million, so these will -- as Kurt mentioned, $30 million a month, $30 million plus a month will achieve our target.
No. I think more, Stephane, if we need to acquire additional revenue. So through acquisitions, [indiscernible]
Oh. Okay. Sorry, I apologize. I apologize. No, currently, I mean, what we're looking in our internal forecast, we do not have those. So these will be added to what Kurt had mentioned before. So we are forecasting with what we have today. But as we make those acquisitions, these will be obviously having a significant impact to our revenue growth, which will allow us to meet or exceed our target.
Thank you, Stephane and Kurt. Our next question comes from Nick Boychuk from Cormark Securities. Can we get some extra clarity on the gross margins for the RNG product? Specifically, is this the new run rate gross margin? Or are there still impacts from Q4 2020 in play here?
Yes. So clearly, there's still impact because we have all those projects go through that basically carry 0 gross margin. So Stephane or we have provided for the losses in Q4. But now what we have is we have projects go through the system where we are working on that have no gross margin. That's why the gross margin is lower. Overall, the other business segments are generating a very good gross margin. And as we move forward and we deliver Biostreams and other RNG projects into the market, our gross margin will go to our normal run rate, which is normally at around 30%. And that, combined with other businesses will generate -- and that's what we are modeling and that's what we are expecting, will generate in the 30%, low 30s gross margin. That's where we need to get to.
Thank you, Kurt. Our next question comes from [indiscernible]. Did you see any uptick in RNG activity in the U.S.A., especially after Amazon's commitment on RNG for transportation, et cetera? And what is the current policy environment in Washington, D.C. towards RNG?
Well, very positive. There are a number of bills going through Congress that might eventually support RNG, not only through, let's say, low carbon fuel standards or RNG mandates, but also through some capital contribution, which would turbocharge the industry. What we are also seeing in the U.S. is, because of the low carbon fuel standards or the renewable fuel standards where the obligated parties are the oil companies, the oil companies are starting to invest directly into project development to secure those carbon credits. So there's a large amount of activity out there. There are many, many projects out there. I think the market will see significant growth over the next years, and I believe most of the reports that are accessible are confirmed that. And we are seeing that reflected in both the quote activity and in the activity or the demand for the Biostream that we are producing. And remember, again, we are the only company, at this point, who has a fully containerized system that can be installed like in a week and start it up in a week and be operational. The challenge for us, as far as I can tell, will be to keep up with the demand and to make sure our lead times are sufficiently short to make the product attractive enough.
Thank you, Kurt. Our next question comes from [ Christian ]. Do you have any news on the CarbonQuest partnership?
Yes. So I can provide some update there. The testing that has been conducted has been finalized. The system is now installed or is being installed in New York City, and they're going to start running real trial tests now in the facility or in the building the units are installed. So I think in the second half of this year, we will receive the data. And then going forward, we are in negotiations with CarbonQuest as to what are the next steps and what are they seeing in the market.
Thank you, Kurt. Our next question comes from Fred Tremblay from Desjardins Capital Markets. Can you talk about your expectations for near-term operating leverage moving forward, particularly as it relates to SG&A following the increase in SG&A expenses observed in Q1?
Yes. Again, I mean, we are building a much more robust company at the moment, and I think we've spoken about that at the last conference call as well. There is a significant scale-up from a company that does like $5 million or $10 million a quarter to a company that is going to do $30 million, $40 million, $50 million a quarter. So clearly, we are investing a good amount of money in building our capabilities from a managerial point of view on building the systems. And there are many systems we need to build, I mean, an M&A team, an integration team. We are needing folks to report on ESG. So if you want to do all those things appropriately, you need to scale your organization. And that scaling happens before the growth really arrives. And I think that is what we are seeing at the moment. Already next quarter, as our revenue will accelerate, you will see that the SG&A is going to be a lower percentage of revenue. And clearly, we set a target already, and the target is well below 20% of revenue for the SG&A. So we have a lot of work to do to grow our revenues now. But the management team that we have in place and that we are putting in place with the incoming ops people, will be sufficient to push the revenue into the $50 million a quarter run rate.
Thank you, Kurt. Our next question comes from [ Steve ]. Can you talk about the production in green hydrogen using HyGear's technologies? And how you see that market developing moving forward?
Yes. So that's actually quite exciting, and it's a very good question. Thank you for it. HyGear has, as you know, 2 technologies: One is steam -- containerized steam methane reformers. And by the way, we are introducing a larger unit, probably early next year. And in those steam methane reformers, we can use 2 sources of fuel. One is natural gas, which will produce grey hydrogen if produced on site. It has a lower carbon footprint than the hydrogen we are getting today from the industrial gas companies because there's no liquefaction and transportation associated with that hydrogen. But we are also capable of buying a renewable gas certificate and then running renewable natural gas into those steam methane reformers, and then you're getting basically green hydrogen. And that is a unique opportunity for us. Because there's a McKinsey study out that clearly states that by 2020 -- 2050, about 5% of the hydrogen demand will be met by biogas-produced hydrogen. And I think that is a niche that we are clearly looking at, which is significant. 5% is not insignificant. And we have the technologies today to basically go from biogas to green hydrogen, and we are already doing it in 2 projects in Europe. But HyGear also has electrolyzer technology, and that electrolyzer technology, depending where you get your electricity, there, you don't have gases input. You have electricity as an input. If you have green electricity, wind, solar, you produce green hydrogen. Again, we have a good number of quotations. The quotation activity is very strong out there for electrolyzer systems. I'd be hoping that we will be announcing our first electrolyze contracts this year, and that will clearly move us into the green hydrogen space if the electricity comes from wind and solar.
Thank you, Kurt. Unfortunately, that's all the time we have today for questions. Kurt, I leave it to you for closing remarks.
Yes. So thank you very much for attending this investor call. I think we could leave you with the impression that the situation at Xebec is improving. We are working through the difficulties that we encountered in Q4. We still were impacted in Q1. There will still be a smaller impact in Q2. But I'm very positive about the full year. I think we will see significant growth and a return to positive adjusted EBITDA. And with that, I leave you. Thank you very much, and have a good day.
Well, everyone, that concludes our webinar. The materials will be posted on our website shortly. You may disconnect at any time. Thank you, and we look forward to seeing you all next time.
Bye-Bye.