TSX-V: HEO
Alternext: MNEMO: ALHEO
Key highlights of the quarter
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Successful integration of Piedmont's activities, which generated great
synergies and increased the contribution of the specialty products and
services business into the overall revenue and gross profit of the
Company.
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$10.6 M of new bookings of water treatment projects, which materially
increase the project backlog.
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Improvement of the financial position: reduction of the long-term debt
and increase of our working capital.
All amounts in Canadian dollars unless otherwise stated.
QUEBEC CITY, May 13, 2014 /CNW Telbec/ - (TSXV: HEO) - H2O Innovation Inc. ("H2O Innovation" or the "Company") announces its results for the third
quarter of fiscal year 2014 ended on March 31, 2014. During the third
quarter of fiscal year 2014, revenues have remained stable compared to
the same quarter of the previous year while the Company has shown
significant improvement in its business model and its financial
position. Indeed, the continuous growth of our specialty products and
services boosted by the acquisition of Piedmont Pacific Corporation
("Piedmont") on December 5, 2013 contributes to increase our recurring
sales, brings additional synergies among our various product lines -
thus solidifying our overall business, and adds greater predictability
in our financial planning. Moreover, through the equity financings and
acquisition completed in the first six-month period of this current
fiscal year, we have significantly reduced our outstanding long-term
debt and increased considerably our working capital, allowing the
Company to be positioned favorably for its future growth coming from
its project backlog.
The decision to expand our sales team for projects on new territories in
Canada and United States is paying off as we are starting to see growth
momentum again in our level of new bookings. Indeed, we have secured
over $20 M of new bookings of water treatment projects during the last
six months. Bidding activity in the project business is expected to
remain very active as we are seeing the level of interest from
municipal customers towards our new FiberFlex design / platform - an
important differentiator for the MF/UF market. Also, the average size
of projects tends to increase and now exceeds $1.5 M.
"Having built and seen this Company evolved over the last 14 years, I
have never been so confident in our future, in our team, in the
strength of our business model combining projects and recurring
speciality product and services and in our ability to execute projects
on the targeted margin. Our future is bright and we are well positioned
to create value for our shareholders", stated Frédéric Dugré, President and Chief Executive Officer of H2O Innovation.
The Company's revenues for the third quarter of fiscal year 2014 totaled
$9.8 M, compared with $9.9 M in the comparable quarter in fiscal year
2013. This decrease of $0.1 M or 1.4% is attributable to the lower
level of revenues from projects deliveries and projects progress which
is offset by the higher level of revenues from sales of specialty
products and services. Revenues from projects reached $4.4 M for this
quarter compared to $5.9 M in the comparable quarter of last fiscal
year.
However, revenues from sales of specialty products and services are
still progressing, reaching $5.4 M for this quarter compared with $4.0
M in the comparable quarter of fiscal year 2013. This 32.8% increase is
mostly the result of our integration of Piedmont's activities. We also
have increased our market shares in Northeastern United States for
maple syrup production equipment and products. The Company continues to
deploy efforts to enlarge our specialty chemicals distributors' network
and provide after sale services to our systems' clients. The continuous
growth of our recurring revenues contributes to stabilize our business
model, increases our gross profit and preserves long-term relationships
with our clients.
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CONSOLIDATED RESULTS
Selected financial data
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Three-month period
ended on March 31,
(Unaudited)
|
|
Nine-month period
ended on March 31,
(Unaudited)
|
|
2014
|
2013
|
|
2014
|
2013
|
|
$
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$
|
|
$
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$
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Revenues
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9,826,466
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9,966,644
|
|
26,935,113
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29,368,446
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Gross profit
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2,682,096
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2,515,477
|
|
7,132,994
|
7,439,109
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Gross profit
|
27.3%
|
25.2%
|
|
26.5%
|
25.3%
|
Operating expenses
|
253,535
|
218,394
|
|
654,765
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493,535
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Selling expenses
|
1,053,254
|
853,744
|
|
2,971,165
|
2,601,528
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Administrative expenses
|
972,410
|
925,700
|
|
2,999,523
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2,642,816
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Research and development expenses - net
|
51,197
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-
|
|
198,648
|
-
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Net earnings (loss)
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(216,314)
|
86,384
|
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(1,186,889)
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845,384
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Basic and diluted earnings (loss) per share
|
(0.002)
|
0.001
|
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(0.015)
|
0.014
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Adjusted EBITDA1
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299,122
|
530,026
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|
278,613
|
1,818,607
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During the quarter, the Company added $10.6 M in new bookings for water
treatment projects. These new bookings, coupled with the revenues
realized from water treatment projects during the quarter, have brought
up the backlog at $23.5 M as at March 31, 2014, compared to $15.4 M a
year ago. This quarter's new bookings include $10.0 M to supply a
seawater reverse osmosis (SWRO) system for the Monterey Peninsula Water
Supply Project in California, United States. This will be the second
largest SWRO system in California and the third most important in the
United States.
The current pipeline of water treatment projects sales is still rich in
opportunities which should allow the Company's sales backlog to support
its revenue growth. We maintain strong bidding activities and
management efforts are aimed at growing the Company's sales backlog at
a steady pace.
The Company's ratio of selling, operating and administrative expenses
("SG&A") as a whole over revenues amounted to 23.2% for this quarter,
up from 20.0% for the corresponding quarter of the previous fiscal
year. This increase is attributable to a higher level of SG&A expenses,
especially selling expenses to support our business plan aimed at
increasing our water treatment systems' sales in North America. "We
have decided to increase the investment in the water treatment projects
sales team to fuel the Company's future growth, which is monetarily
affecting the level of SG&A." stated Frédéric Dugré. With the acquisition of Piedmont, management aims to reduce the SG&A
ratio to a level similar to last year through an increase of revenues
and tighter management of SG&A expenses.
Adjusted EBITDA for the quarter was recorded at $299,122 compared with
$530,026 for the same period ended March 31, 2013. Despite a similar
level of revenues recorded during the quarter compared with the
corresponding quarter of the previous fiscal year at a higher gross
profit, the increase in SG&A expenses have contributed to generating a
smaller adjusted EBITDA.
Operating activities used ($298,938) in cash for the period ended March
31, 2014, compared with ($1,073,407) of cash used during the
corresponding period ended March 31, 2013. The increase is mainly
attributable to the decline in net loss in the third quarter of fiscal
year 2014 as compared with the net earnings in corresponding period
ended March 31, 2013 and to the less negative change in working capital
items.
Over the nine-month period ended March 31, 2014, the Company's revenues
totaled $26.9 M, compared to $29.4 M for the corresponding period ended
March 31, 2013, showing a decrease of 8.3%. During this same period the
Company recorded net loss amounting to ($1,186,889) and a positive
adjusted EBITDA of $278,613, compared to net earnings of $845,384 and a
positive adjusted EBITDA of $1,818,607 for the corresponding period of
fiscal year 2013. For the nine-month period ended March 31, 2014, the
Company used ($2,816,771) of cash flows from its operating activities,
compared to $1,160,757 generated by its operating activities for the
corresponding period of fiscal year 2013.
The third quarter financial report is available on www.h2oinnovation.com and on NYSE Euronext Alternext's site. Additional information on the
Company is also available on SEDAR (www.sedar.com).
Prospective disclosures
Certain statements set forth in this press release regarding the
operations and the activities of H2O Innovation as well as other communications by the Company 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, performance and achievements and the
estimate of amounts that cannot yet be determined. Forward-looking
statements include the use of words such as "anticipate", "if",
"believe", "continue", "could", "estimate", "expect", "intend", "may",
"plan", "potential", "predict", "project", "should" or "will", and
other similar expressions, as well as those usually used in the future
and the conditional, notably regarding certain assumptions as to the
success of a venture. Those forward-looking statements, based on the
current expectations of management, involve a number of risks and
uncertainties, known and unknown, which may result in actual and future
results, performance and achievements of the Company to be materially
different than those indicated. Information about the risk factors to
which the Company is exposed is provided in the Annual Information Form
dated September 24, 2013 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 to municipal, energy & natural resources end-users. Also,
directly and through its affiliates, H2O Innovation provides services and products complementary to its
membrane filtration and reverse osmosis systems. These products consist
of a complete line of specialty chemicals and consumables and a
complete line of couplings. For more, 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 Alternext Exchange accepts responsibility for the adequacy or
accuracy of this release.
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1 The definition of adjusted earnings before interest, tax depreciation
and amortization (adjusted EBITDA) does not take into account the
Company's changes in fair value of contingent considerations,
impairment of intangible assets, impairment of goodwill, stock-based
compensation costs, gain on settlement agreement, and share of
(earnings) loss in a joint venture. The definition of adjusted EBITDA
used by the Company may differ from those used by other companies.
SOURCE H2O Innovation Inc.