H2O Innovation’s 2020 First Quarter Results: Growth Fueled by Acquisition and Specialty Products
Press Release
Key financial highlights
- Revenue growth of 15.8 % over the same period of the previous fiscal year, reaching $28.2 M for the first quarter of fiscal year 2020;
- Recurring revenues1 represented 80.2 % of the Corporation’s total revenues for the first quarter of fiscal year 2020;
- Gross profit margin before depreciation and amortization expenses represented 23.8 % of the Corporation’s total revenues for the first quarter of fiscal year 2020, compared to 22.6 % for the first quarter of previous fiscal year;
- Consolidated backlog, combining Projects and O&M, stood at $153.3 M as of September 30, 2019, compared to $139.9 M for the period ended September 30, 2018;
- Adjusted EBITDA2 reached $1.6 M, or 5.8 % of revenues, for the first quarter of fiscal year 2020 compared to $1.3 M, or 5.2 % of revenues, for the comparable quarter of previous fiscal year;
- Net loss amounted to ($1.0 M) for the first quarter of fiscal year 2020, compared to a net loss of ($0.3 M) for the comparable quarter of previous fiscal year;
- Cash flows from operating activities reached $2.2 M for the first quarter of fiscal year 2020, compared to $0.7 M reached during the comparable quarter of previous fiscal year;
- Net debt of $8.2 M as at September 30, 2019, from $9.8 M as at June 30, 2019.
All amounts in Canadian dollars unless otherwise stated.
Quebec City, November 13, 2019 – (TSXV: HEO) – H2O Innovation Inc. (“H2O Innovation” or the “Corporation”) announces its financial results for the first quarter ended September 30, 2019.
“The first quarter of this new fiscal year was impacted positively by the acquisition of Hays completed last fiscal year and by the organic growth of our specialty products sales. In the last couple of quarters, H2O Innovation has been pursuing its growth through strategic acquisitions, enabling greater customers’ retention and more cross-selling between our various business lines. Our focus to grow organically and with acquisitions in the Specialty Products and Operation & Maintenance business pillars has allowed us to increase our recurring revenues at 80% and to improve our gross profit margin simultaneously to 23.8%. Moreover, the acquisition of Genesys, announced earlier in November, should also allow us to further improve our margins and diversify our Specialty Products sales,” stated Frédéric Dugré, President and Chief Executive Officer of H2O Innovation.
- The Corporation defines recurring revenue 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. 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.
- 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 at the end of this document. The definition of adjusted EBITDA used by the Corporation may differ from those used by other companies.
| Three-month periods ended | |||||||
| (In thousands of Canadian dollars) | September 30, | ||||||
| 2019 | 2018 | ||||||
| $ | %(b) | $ | %(b) | ||||
| Revenues per business pillar | |||||||
| Projects & Aftermarket | 8,205 | 29.1 | 10,272 | 42.1 | |||
| Specialty products | 5,192 | 18.4 | 4,206 | 17.3 | |||
| O&M | 14,826 | 52.5 | 9,893 | 40.6 | |||
| Total revenues | 28,223 | 100.0 | 24,371 | 100.0 | |||
| Recurring revenues (a) | 22,639 | 80.2 | 16,667 | 68.5 | |||
| Cost of goods sold | 21,516 | 76.2 | 18,865 | 77.4 | |||
| Gross profit margin before depreciation and amortization | 6,707 | 23.8 | 5,506 | 22.6 | |||
| General operating expenses | 1,388 | 4.9 | 1,328 | 5.4 | |||
| Selling expenses | 1,865 | 6.6 | 1,647 | 6.8 | |||
| Administrative expenses | 1,799 | 6.4 | 1,401 | 5.7 | |||
| Total SG&A | 5,052 | 17.9 | 4,376 | 18.0 | |||
| Net loss for the period | (1,033) | (3.7) | (323) | (1.3) | |||
| EBITDA (a) | 1,065 | 3.8 | 1,095 | 4.5 | |||
| Adjusted EBITDA (a) | 1,625 | 5.8 | 1,266 | 5.2 | |||
- Non-IFRS financial measurement reconciled below.
- % over revenues.
First Quarter Results
Consolidated revenues from our three business pillars, for the three-month period ended on September 30, 2019, increased by $3.8 M, or 15.8 %, to reach $28.2 M compared to $24.4 M for the comparable quarter of previous fiscal year. This overall increase is fueled by the acquisition of Hays during the second quarter of fiscal year 2019, which contributed $5.1 M in revenues during this quarter, and by the increase of $1.0 M coming from Specialty Products, partly offset by the decrease in revenues of $2.1 M from the Projects & Aftermarket.
The net loss amounted to ($1.0 M) or ($0.019) per share for the first quarter of fiscal year 2020 compared to a net loss of ($0.3 M) or ($0.008) per share for the comparable quarter of fiscal year 2019. The net loss variation is mostly due to the adjusted EBITDA improvement, partly offset by the acquisition, integration and other related costs in the amount of $0.5 M and due to the increased level of depreciation and amortization. The increased level of depreciation and amortization is mainly coming from the increased level of intangible assets acquired through Hays during the second quarter of the previous fiscal year.
The Corporation’s gross profit margin before depreciation and amortization stood at $6.7 M, or 23.8 %, during the first quarter of fiscal year 2020, compared to $5.5 M, or 22.6 % for the previous fiscal year, representing an increase of $1.2 M or 21.8 %. The increase in consolidated gross profit margin is coming from the O&M and the Projects and Aftermarket business pillars, while the Specialty Products showed a slight decrease in its gross profit margin compared to the same quarter of the previous fiscal year. The adoption of IFRS 16 – Leases resulted in a decrease of the COGS expenses of $0.1 M for the first quarter of fiscal year 2020.
The Corporation’s SG&A reached $5.1 M during the first quarter of fiscal year 2020, compared to $4.4 M for the previous fiscal year, representing an increase of $0.7 M, or 15.4 %, while the revenues of the Corporation increased by 15.8 %. SG&A for the first quarter of fiscal year 2020 were impacted by the adoption of IFRS 16 – Leases, as lease expenses were reclassed to depreciation and amortization. The adoption of IFRS 16 – Leases resulted in a decrease of the SG&A expenses of $0.2 M for the first quarter of fiscal year 2020.
IBF4
