(TSXV: HEO) – H2O Innovation Inc. (“H2O Innovation” or the
“Corporation”) announces its financial results for the second
quarter of fiscal year 2020 ended December 31, 2019.
“We keep executing our business plan focused on
growing predominantly our specialty products offering and O&M
service footprint. Through our unique business model, we are
promoting high customer retention, thus high recurring sales
allowing us to significantly de-risk the business. These efforts,
on a twelve-month period, have resulted in revenue growth of 13.5 %
while the adjusted EBITDA has increased by 68.0% over the same
period. On a last twelve months basis, we have clearly shown the
scalability of our business model as our revenues have increased by
19.8 %, punctuated by the acquisitions of Hays and Genesys. During
the same last twelve months basis, the adjusted EBITDA has
progressed significantly from $4.8 M to $8.5 M, showing an
improvement of 76.5 %. Our strategy is working and our customers
benefit today from a more complete and diversified offering of
products and services allowing them to grow their business as a
distributor or to benefit from an integrated and accountable
customer care,” stated Frédéric Dugré, President and Chief
Executive Officer of H2O Innovation.
(In thousands of Canadian dollars) |
Three-month periods ended December 31, |
|
Six-month periods ended December 31, |
|
2019 |
|
2018 (b) |
|
2019 |
|
2018 (b) |
|
|
$ |
|
% (a) |
|
$ |
|
% (a) |
|
$ |
|
% (a) |
|
$ |
|
% (a) |
|
Revenues per business pillar |
|
|
|
|
|
|
|
|
Projects & Aftermarket |
7,384 |
|
22.2 |
|
11,866 |
|
40.4 |
|
15,589 |
|
25.3 |
|
22,138 |
|
41.2 |
|
Specialty products |
10,375 |
|
31.1 |
|
5,872 |
|
20.0 |
|
15,567 |
|
25.3 |
|
10,078 |
|
18.8 |
|
O&M |
15,575 |
|
46.7 |
|
11,640 |
|
39.6 |
|
30,401 |
|
49.4 |
|
21,533 |
|
40.1 |
|
Total revenues |
33,334 |
|
100.0 |
|
29,378 |
|
100.0 |
|
61,557 |
|
100.0 |
|
53,749 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
Gross profit margin
before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and amortization |
8,283 |
|
24.8 |
|
6,244 |
|
21.3 |
|
14,974 |
|
24.3 |
|
11,750 |
|
21.9 |
|
SG&A expenses(c) |
5,896 |
|
17.7 |
|
4,907 |
|
16.7 |
|
10,955 |
|
17.8 |
|
9,283 |
|
17.3 |
|
Net loss for the period |
(909 |
) |
(2.7 |
) |
(1,212 |
) |
(4.1 |
) |
(1,945 |
) |
(3.2 |
) |
(1,535 |
) |
(2.9 |
) |
EBITDA1 |
1,113 |
|
3.3 |
|
910 |
|
3.1 |
|
2,154 |
|
3.5 |
|
2,005 |
|
3.7 |
|
Adjusted EBITDA1 |
2,313 |
|
6.9 |
|
1,377 |
|
4.7 |
|
3,916 |
|
6.4 |
|
2,643 |
|
4.9 |
|
Recurring revenues2 |
28,033 |
|
84.1 |
|
20,808 |
|
70.8 |
|
50,672 |
|
82.3 |
|
37,475 |
|
69.7 |
|
(a) % over revenues. |
(b) Comparative figures have not been adjusted to reflect the
adoption of IFRS 16 – Leases as set out in the accounting
policy. |
(c) Selling, general operating and administrative expenses
(SG&A). |
Second Quarter
ResultsConsolidated revenues from our three
business pillars, for the three-month period ended
on December 31, 2019, increased by $3.9 M, or 13.5
%, to reach $33.3 M compared to $29.4 M for the comparable
quarter of previous fiscal year. This overall increase is
fueled by the acquisition of Genesys during the second quarter of
fiscal year 2020, which contributed $1.6 M in revenues during
this quarter. The growth is also explained by the increase of
$2.9 M coming from Specialty Products and $4.0 M coming
from O&M, partly offset by the decrease in revenues
of $4.5 M from the Projects & Aftermarket. Hays, which was
acquired on December 1st, 2018, contributed $5.3 M to the
revenues of the second quarter of fiscal year 2020, compared to
$1.5 M for the same quarter of fiscal year 2019. The increase
is in line with our business plan to grow first the Specialty
Products and O&M, as well as prioritize projects with higher
gross profit margins, fueling opportunities for other business
pillars.
The net loss amounted to ($0.9 M)
or ($0.014) per share for the second quarter of fiscal
year 2020 compared to a net loss of ($1.2 M) or ($0.027)
per share for the comparable quarter of fiscal year 2019. The net
loss variation was impacted by the higher level of revenues coming
from Specialty Products, having a high gross profit margin before
depreciation and amortization. The net loss is mainly due to the
acquisition, integration and other related costs of $1.3 M
related to the acquisition of Genesys.
The Corporation’s gross profit margin before
depreciation and amortization stood at $8.3 M, or 24.8 %,
during the second quarter of fiscal year 2020, compared
to $6.2 M, or 21.3 % for the previous fiscal year,
representing an increase of $2.1 M, or 32.7 %. The
increase in consolidated gross profit margin is explained by the
increase in revenues coming from Specialty Products business
pillar, characterized with higher gross profit margins. These
higher-margin sales, positively affected by the acquisition of
Genesys and the strong growth in Piedmont business line,
contributed significantly to increase the gross profit margin
before depreciation and amortization in the second quarter of
fiscal year 2020. The gross profit margin was also positively
impacted by the improvement of the gross profit margins coming from
the Projects & Aftermarket business line. The adoption of
IFRS 16 – Leases resulted in a decrease of the COGS expenses of
$0.1 M for the second quarter of fiscal year 2020.
The Corporation’s SG&A reached $5.9 M
during the second quarter of fiscal year 2020, compared
to $4.9 M for the same period of the previous fiscal year,
representing an increase of $1.0 M, or 20.2 %, while
the revenues of the Corporation increased by 13.5 %. The
acquisition of Genesys contributed $0.3 M of this increase while
the acquisition of Hays on December 1st, 2018 contributed to
$0.3 M of the SG&A for the second quarter of fiscal
year 2020, compared to $0.2 M for the same period of the
previous fiscal year. The increase is also due to new hires to
support the significant growth of Piedmont business line and to the
increased level of revenues, which increased the level of
commissions recorded. The adoption of IFRS 16 – Leases resulted in
a decrease of the SG&A expenses of $0.2 M for
the second quarter of fiscal year 2020, as lease expenses were
reclassified to depreciation and amortization.
The Corporation’s adjusted EBITDA increased
by $0.9 M, or 68.0 %, to reach $2.3 M during
the second quarter of fiscal year 2020, from $1.4 M for
the comparable period of fiscal year 2019. The adjusted EBITDA %
improved and reached 6.9 % for the second quarter of
fiscal year 2020, compared to 4.7 % for the same quarter of
last fiscal year. Improvement of the adjusted EBITDA was driven by
the increase in the Corporation’s consolidated revenues and by
the improvement in gross profit margins, partly offset by the
increase in SG&A. Furthermore, the adoption on July 1, 2019 of
IFRS 16 - Leases contributed to reduce by
$0.3 M the operating lease expenses for the quarter. Excluding
the adjustment from IFRS 16 - Leases, the adjusted EBITDA
would have been 6.0 %.
Cash flows from operating
activities used ($0.4 M) for the quarter
ended December 31, 2019, compared to $2.1 M of cash
flows generated from operating activities during the same
period of previous fiscal year. The decrease in the cash flows from
operating activities is coming from the change in working capital
items.
Reconciliation of Net Loss to EBITDA and
to Adjusted EBITDA The definition of adjusted earnings
before interest, taxes, depreciation and amortization (adjusted
EBITDA) does not take into account the Corporation’s finance costs
– net, stock-based compensation costs, unrealized exchange (gains)
/ losses, change in fair value of contingent consideration and
acquisition and integration costs. The reader can establish the
link between adjusted EBITDA and net loss by looking at the
reconciliation presented below. The definition of adjusted EBITDA
used by the Corporation may differ from those used by other
companies.
Even though EBITDA and adjusted EBITDA are
non-IFRS measures, it is used by management to make operational and
strategic decisions. Providing this information to the
stakeholders, in addition to the GAAP measures, allows them to see
the Corporation’s results through the eyes of the management, and
to better understand the financial performance, notwithstanding the
impact of GAAP measures.
|
Three-month periods
ended December
31, |
|
Six-month periods ended December
31, |
|
(In thousands of Canadian dollars) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
$ |
|
$ |
|
$ |
|
$ |
|
Net loss for the period |
(909 |
) |
(1,212 |
) |
(1,945 |
) |
(1,535 |
) |
Finance costs – net |
610 |
|
969 |
|
1,039 |
|
1,500 |
|
Income taxes |
(297 |
) |
72 |
|
(304 |
) |
(19 |
) |
Depreciation of property,
plant and equipment |
691 |
|
288 |
|
1,380 |
|
567 |
|
Amortization of intangible assets |
1,018 |
|
793 |
|
1,984 |
|
1,492 |
|
EBITDA |
1,113 |
|
910 |
|
2,154 |
|
2,005 |
|
|
|
|
|
|
Unrealized exchange (gain)
loss |
(241 |
) |
(11 |
) |
(344 |
) |
44 |
|
Stock-based compensation
costs |
54 |
|
75 |
|
114 |
|
158 |
|
Changes in fair value of the
contingent consideration |
96 |
|
- |
|
211 |
|
- |
|
Acquisition-related costs,
integration costs and |
|
|
|
|
|
|
|
|
other costs |
1,291 |
|
403 |
|
1,781 |
|
436 |
|
Adjusted EBITDA |
2,313 |
|
1,377 |
|
3,916 |
|
2,643 |
|
Net DebtThe definition of net
debt consists of bank loans and long-term debt less cash. The
definition of net debt used by the Corporation may differ from
those used by other companies.
(In thousands of Canadian dollars) |
December 31, 2019 |
|
June 30, 2019 |
|
Variation |
|
|
$ |
|
$ |
|
$ |
|
% |
|
Bank loans |
6,236 |
|
7,545 |
|
(1,309 |
) |
(17.3 |
) |
Current portion of long-term
debt |
3,171 |
|
1,863 |
|
1,308 |
|
70.2 |
|
Long-term debt |
15,078 |
|
6,578 |
|
8,500 |
|
129.2 |
|
Less:
Cash |
(6,467 |
) |
(6,206 |
) |
(261 |
) |
(4.2 |
) |
Net debt |
18,018 |
|
9,780 |
|
8,238 |
|
84.2 |
|
Recurring RevenuesThe
Corporation defines recurring revenues as: recurring revenue by
nature which is a non-IFRS measure and is defined by management as
the portion of the Corporation's revenue coming from customers with
whom the Corporation has established a long-term relationship
and/or has a recurring sales pattern. However, there is no
guarantee that recurring revenues will last indefinitely. The
Corporation’s recurring revenues are coming from the Aftermarket,
Specialty Products and O&M business lines. This non-IFRS
measure is used by management to evaluate the stability of revenues
from one year to the other.
H2O Innovation Conference Call
Frédéric Dugré, President and Chief Executive Officer and Marc
Blanchet, Chief Financial Officer, will hold an investor conference
call to discuss the second quarter financial results in further
details at 10:00 a.m. Eastern Time on Wednesday, February 12,
2020.
To access the call, please call 1 (877) 223-4471
or 1 (647) 788-4922, five to ten minutes prior to the start time.
Presentation slides for the conference call will be made available
on the Corporate Presentations page of the Investors section of the
Corporation’s website.
The second
quarter financial report is available
on www.h2oinnovation.com and on the NYSE Euronext Growth Paris
website. Additional information on the Corporation is also
available on SEDAR (www.sedar.com).
Prospective DisclosuresCertain
statements set forth in this press release regarding the operations
and the activities of H2O Innovation as well as other
communications by the Corporation to the public that describe more
generally management objectives, projections, estimates,
expectations or forecasts may constitute forward-looking statements
within the meaning of securities legislation. Forward-looking
statements concern analysis and other information based on forecast
future results and the estimate of amounts that cannot yet be
determined. Forward-looking statements include the use of the words
such as “anticipate”, “if”, “believe”, “continue”, “could”,
“estimate”, “expect”, “intend”, “may”, “plan”, “potential”,
“predict”, “project”, “should” or “will” and other similar terms as
well as those usually used in the future and the conditional. Those
forward-looking statements involve a number of risks and
uncertainties, which may result in actual and future results of the
Corporation to be materially different than those indicated.
Information about the risk factors to which the Corporation is
exposed is provided in the Annual Information Form dated
September 24, 2019 available on SEDAR (www.sedar.com). Unless
required to do so pursuant to applicable securities legislation,
H2O Innovation assumes no obligation to update or revise
forward-looking statements contained in this press release or in
other communications as a result of new information, future events
and other changes.
About H2O Innovation H2O
Innovation designs and provides state-of-the-art, custom-built and
integrated water treatment solutions based on membrane filtration
technology for municipal, industrial, energy and natural resources
end-users. The Corporation’s activities rely on three main pillars.
The first one is Water & Wastewater Projects, and
Aftermarket Services and includes all types of projects as
well as digital solutions (IntelogxTM and Clearlogx®) to monitor
and optimize water treatment plants. H2O Innovation’s second
pillar, Specialty Products, includes a complete
line of maple equipment and products, specialty chemicals,
consumables and specialized products for the water industry,
through H2O Innovation Maple, PWT, Genesys and Piedmont. The
Corporation is now exporting his specialty products in more than 80
countries. Finally, H2O Innovation operates, maintains, and repairs
water and wastewater treatment systems, distribution equipment and
associated assets for all of its clients and ensures that water
quality meets regulatory requirements, through the third pillar –
Operation and Maintenance – under the Utility
Partners and Hays Utility South Corporation brands. Together, they
employ 435 employees for the operation of more than 175 utilities
in two Canadian provinces and eleven US states, mainly on the US
Gulf coast, Southeast, Northeast (New England) and the West Coast.
For more information, visit www.h2oinnovation.com.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) nor the NYSE Euronext Growth Paris accepts
responsibility for the adequacy or accuracy of this release.
Source: H2O Innovation Inc.
www.h2oinnovation.comContact: Marc
Blanchet+1 418-688-0170 marc.blanchet@h2oinnovation.com
1 These non-IFRS measures are presented as
additional information and should be used in conjunction with the
IFRS financial measurements presented in this report. Definition of
all non-IFRS measures and additional IFRS measures are provided at
the end of this press release to give the reader a better
understanding of the indicators used by management.
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