Welcome!

News Feed Item

H2O Innovation's 2018 Second Quarter Results - The Corporation is scaling up, showing growth in all business pillars

QUEBEC CITY, QUEBEC -- (Marketwired) -- 02/14/18 -- H2O Innovation Inc. (TSX VENTURE:HEO)

Key highlights

--  Revenues reached $25.8 M for the second quarter of fiscal year 2018,
    representing a $5.9 M, or 29.4% growth, compared to the second quarter
    of the previous fiscal year; 
--  Recurring revenues from Specialty Products and Services ("SP&S") and
    Operation & Maintenance ("O&M") business pillars represent 74.5% of
    total revenues; 
--  Consolidated backlog, combining Water and Wastewater Treatment Projects
    ("Projects") and O&M, stood at $116.1 M as of December 31, 2017,
    compared to $109.2 M for the period ended December 31, 2016,
    representing a 6.3% organic growth; 
--  Adjusted EBITDA(1) reached $1.4 M for the second quarter of fiscal year
    2018, representing a $0.6 M, or 67.8% growth, compared to the second
    quarter of fiscal year 2017; 
--  Adjusted EBITDA over revenues increased, from 4.1% for the three-month
    period ended December 31, 2016 to reach 5.3% for this quarter ended
    December 31, 2017; 
--  Net loss of ($1.3 M), compared to ($1.1 M) in the second quarter of
    previous fiscal year, mostly impacted by the tax reform. Without the
    $1.1 M impact from the new U.S. tax reform, net loss would have been
    ($0.2 M).
    

All amounts in Canadian dollars unless otherwise stated.

H2O Innovation Inc. ("H2O Innovation" or the "Corporation") (TSX VENTURE:HEO)(ALTERNEXT:MNEMO:ALHEO)(OTCQX:HEOFF) announces its results for the second quarter of fiscal year 2018 ended December 31, 2017. Revenues for the second quarter of fiscal year 2018 totaled $25.8 M, representing a $5.9 M or 29.4% increase, as compared with revenues of $19.9 M for the second quarter of the previous fiscal year. This increase is fueled by the organic growth of the Projects and SP&S business pillars. The Projects business pillar is currently regaining speed after a slowdown in specific projects, which impacted last fiscal year's financial results. More projects are reaching the revenue recognition phase for this quarter compared to the same quarter of fiscal year 2017. SP&S results have been bolstered by the Maple business line, which is showing a faster growth with record results quarter after quarter. Our growing consolidated backlog, which stands at $116.1 M as of December 31, 2017, compared to $109.2 M last year, continues to provide excellent visibility on revenue recognition for the coming quarters.

----------------------------------------------------------------------------
CONSOLIDATED RESULTS         Three-month periods          Six-month periods 
Selected financial data       ended December 31,         ended December 31, 
                                                                            
                                                                       2016 
                                2017        2016        2017  (adjusted)(2) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   $           $           $              $ 
Revenues                  25,818,929  19,957,831  48,436,927     37,441,981 
Gross profit before                                                         
 depreciation and                                                           
 amortization              6,213,020   4,834,439  10,667,406      9,125,664 
Gross profit before                                                         
 depreciation and                                                           
 amortization (%)               24.1%       24.2%       22.0%          24.4%
Operating expenses         1,009,008     486,003   1,886,393        924,407 
Selling expenses           2,217,535   1,615,633   3,855,748      3,211,524 
Administrative expenses    1,625,073   2,132,083   3,102,683      3,820,501 
Research and development                                                    
 expenses                        170      33,872       8,685        115,244 
Net loss                  (1,340,441) (1,093,270) (2,430,316)    (2,042,429)
Basic and diluted loss                                                      
 per share                    (0.033)     (0.027)     (0.061)        (0.069)
Adjusted EBITDA            1,358,281     809,625   1,946,344      1,438,640 
Adjusted EBITDA over                                                        
 revenues (%)                    5.3%        4.1%        4.0%           3.8%
----------------------------------------------------------------------------

Revenues from Projects stood at $6.6 M for the second quarter of fiscal year 2018, compared to $3.4 M in the corresponding period of the previous fiscal year, representing a 90.9% increase. This significant increase is explained by an increasing number of projects entering a higher revenue recognition phase. The Corporation also developed a more diversified portfolio between water and wastewater projects, with 34.0% in terms of number of projects being wastewater projects as of December 31, 2017, compared to 16.7% as of December 31, 2016. The wastewater projects are usually characterized by a better gross margin before depreciation and amortization. The current sales pipeline of Projects remains rich in opportunities and coming quarters should remain busy supported by a $51.9 M projects backlog, as of December 31, 2017. With the addition of the two recent flagship industrial projects announced at the beginning of the third quarter, the projects backlog stand at $56.1 M as of February 7, 2018.

On the SP&S side, revenues reached $10.6 M for the second quarter of fiscal year 2018, compared to $7.7 M in the comparable quarter of the previous fiscal year, which represents an increase of 37.6%. This increase in SP&S revenues is a result of investments made in the operating and selling functions to support and fuel the growth of this business line. The Maple business line continues its sustained growth with record sales for this quarter, as the activities are ramping up to the Maple season. "Furthermore, a first significant project was signed for the filter housing product line, which will definitely help us position ourselves and obtain more references", stated Frederic Dugre, President and CEO of H2O Innovation.

Revenues coming from O&M activities are recurring in nature and stand at $8.6 M, compared to revenues of $8.8 M in the corresponding quarter of last fiscal year, representing a 2.0% decrease. However, this decrease is only due to the negative impact of the appreciation of the Canadian dollar over US dollar. Notwithstanding the foreign exchange impact, the O&M business pillar is showing an organic growth of 2.9% in U.S. dollars. The O&M business pillar is showing a steady growth since the acquisition of Utility Partners. The Corporation is signing new contracts, as reflected in the growing backlog. For the O&M business pillar, the backlog is converting to revenues evenly over the period of the contract. The backlog coming from O&M contracts stands at $64.2 M as at December 31, 2017, and consists of long-term contracts, mainly with municipalities, which contain multi-year renewal options. All expiring contracts following the acquisition have been renewed successfully. At the same quarter of the previous fiscal year, the O&M contracts backlog stood at $54.9 M, representing a 16.9% increase over a twelve-month period.

"New territories are opening to the O&M business line, with contracts won in Western Canada and Texas. These are potentially high growth territories, where the Corporation's O&M activities were not yet established. This will also develop the synergies with the Projects and SP&S business pillars, as they are already active on these geographic markets. New contracts have also been won in the State of New-York, with the Corporation providing both the MBR wastewater equipment and O&M services to the same plants", added Frederic Dugre, President and CEO of H2O Innovation.

In this second quarter of fiscal year 2018, the Corporation generated a $6.2 M or 24.1% gross profit before depreciation and amortization compared to $4.8 M or 24.2% for the last fiscal year. The increase in the gross profit margin before depreciation and amortization is explained by the increase in revenue level, with all the business lines showing revenue increase for this quarter ended December 31, 2017, compared to the previous comparable quarter. The improvement of the gross profit margin before depreciation and amortization is also attributable to the sustained organic growth of the SP&S and O&M revenues. The ratio of gross profit margin before depreciation and amortization over revenues remained stable.

The Corporation's ratio of selling, operating and administrative expenses ("SG&A") as a whole over revenues amounted to 18.8% for this quarter, down from 21.2% for the corresponding quarter of the previous fiscal year. This decrease in percentage of SG&A over revenues is mostly attributable to the increase of the overall revenues without impacting proportionally the selling, operating and administrative expenses.

The Corporation's adjusted EBITDA increased by $0.6 M or 67.8%, to reach $1.4 M during the second quarter of fiscal year 2018, from $0.8 M for the comparable quarter of fiscal year 2017. The adjusted EBITDA improvement is generated by a significant increase in revenues for the Projects and the SP&S business lines, and driven by a decrease of the selling, general and administrative expenses (SG&A) as a percentage over revenues, impacting positively the net loss before income taxes. The adjusted EBITDA over revenues ratio stands at 5.3%, compared to 4.1% for the same quarter of fiscal year 2017. "If comparing the second quarter of fiscal year 2018 to the first quarter of this same fiscal year, the revenues have increased by 14.2% (revenues of $22.6 M during the first quarter, compared to $25.8 M for the second quarter), while the adjusted EBITDA have increased by 131.0% (standing at $0.6 M for the first quarter of fiscal year 2018 compared to $1.4 M for the second quarter). The Corporation is growing the EBITDA at a faster pace than the revenues, proving the scalability of the business model", stated Frederic Dugre, President and CEO of H2O Innovation.

The net loss increased by $0.2 M, or 22.6%, to reach ($1.3 M) during the second quarter of fiscal year 2018, from a net loss of ($1.1 M) for the comparable quarter of the previous fiscal year. The increase in net loss is mostly caused by the Tax Cuts and Jobs Act (the "Tax Act"), a tax reform enacted by the U.S. government during the second quarter of fiscal year 2018, leading to an additional deferred tax expense of $1.1 M for this quarter. Without the $1.1 M impact from the new U.S. tax legislation, net loss would have been ($0.2 M). The net loss is also impacted by the foreign exchange, as most of the revenues are in U.S. dollars, whereas the administrative expenses are mostly incurred in Canadian dollars. The Canadian dollar appreciation noticed during the quarter affected negatively the net results of the Corporation compared to the same quarter of the previous fiscal year.

Net cash generated by operating activities reached $0.6 M for the period ended December 31, 2017, compared to $1.1 M during the corresponding period ended December 31, 2016. The decrease is due to a significant impact of change in working capital items, such as a higher volume of activities during this quarter, compared to the second quarter of fiscal year 2017, an increased level of finished goods inventory to meet the growing demands and a timing difference within the projects production phases affecting the invoicing milestones reached. Investment in property, plant and equipment was also realized, totaling $0.4 M for the three-month period ended December 31, 2017, compared to $0.1 M for the three-month period ended December 31, 2016.

Reconciliation of adjusted EBITDA to net loss

Even though adjusted EBITDA is a non-IFRS measure, 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 management, and to better understand the financial performance, notwithstanding the impact of GAAP measures.

----------------------------------------------------------------------------
                             Three-month periods         Six-month periods  
                              ended December 31,         ended December 31, 
                                                                       2016 
                                2017        2016        2017  (adjusted)(2) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   $           $           $              $ 
Net loss for the period   (1,340,441) (1,093,270) (2,430,316)    (2,042,429)
Finance costs - net          473,369     321,870     824,575        656,295 
Income taxes               1,176,701     (88,127)  1,038,716       (391,593)
Depreciation of property,                                                   
 plant and equipment         242,978     181,436     550,208        356,464 
Amortization of                                                             
 intangible assets           674,552     837,666   1,365,669      1,368,595 
Unrealized exchange                                                         
 (gains) / losses             25,367     135,467     (73,134)       177,868 
Acquisition and                                                             
 integration costs                 -     347,124      80,875      1,020,829 
Stock-based compensation                                                    
 costs                       105,755     167,459     226,387        292,611 
Net loss on bank fraud             -           -     363,364              - 
----------------------------------------------------------------------------
Adjusted EBITDA            1,358,281     809,625   1,946,344      1,438,640 
----------------------------------------------------------------------------

H2O Innovation Conference Call

Frederic Dugre, President and Chief Executive Officer and Marc Blanchet, Chief Financial Officer, will hold an investor conference call to discuss the financial results for 2018 second quarter in further details at 10:00 a.m. Eastern Time on Wednesday, February 14, 2018.

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 NYSE Euronext Alternext's site. Additional information on the Corporation 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 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, 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 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 26, 2017 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 pillars which are i) water and wastewater projects; ii) specialty products and services, including a complete line of specialty chemicals, consumables, specialized products for the water treatment industry as well as control and monitoring systems; and iii) operation and maintenance services for water and wastewater treatment systems. 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 Alternext Exchange accepts responsibility for the adequacy or accuracy of this release.

Source: H2O Innovation Inc.

(1)  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, net loss on bank fraud, unrealized exchange (gains) / losses and
     acquisition and integration costs. The reader can establish the link   
     between adjusted EBITDA and net earnings. The definition of adjusted   
     EBITDA used by the Corporation may differ from those used by other     
     companies.                                                             
(2)  The adjusted results disclosed in this MD&A represent the results that 
     should have been recorded in the financial statements for the six-month
     period ended December 31, 2016, with the acquisition of Utility        
     Partners dated July 26, 2016, based on the audited financial results   
     for fiscal year 2017. They have been adjusted to include only 5 months 
     of Utility Partners' operations.                                       

Contacts:
Marc Blanchet
+1 418-688-0170
[email protected]
www.h2oinnovation.com

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
All in Mobile is a place where we continually maximize their impact by fostering understanding, empathy, insights, creativity and joy. They believe that a truly useful and desirable mobile app doesn't need the brightest idea or the most advanced technology. A great product begins with understanding people. It's easy to think that customers will love your app, but can you justify it? They make sure your final app is something that users truly want and need. The only way to do this is by ...
Authorization of web applications developed in the cloud is a fundamental problem for security, yet companies often build solutions from scratch, which is error prone and impedes time to market. This talk shows developers how they can (instead) build on-top of community-owned projects and frameworks for better security.Whether you build software for enterprises, mobile, or internal microservices, security is important. Standards like SAML, OIDC, and SPIFFE help you solve identity and authenticat...
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...
Dynatrace is an application performance management software company with products for the information technology departments and digital business owners of medium and large businesses. Building the Future of Monitoring with Artificial Intelligence. Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more busine...
DXWorldEXPO LLC announced today that Big Data Federation to Exhibit at the 22nd International CloudEXPO, colocated with DevOpsSUMMIT and DXWorldEXPO, November 12-13, 2018 in New York City. Big Data Federation, Inc. develops and applies artificial intelligence to predict financial and economic events that matter. The company uncovers patterns and precise drivers of performance and outcomes with the aid of machine-learning algorithms, big data, and fundamental analysis. Their products are deployed...
Whenever a new technology hits the high points of hype, everyone starts talking about it like it will solve all their business problems. Blockchain is one of those technologies. According to Gartner's latest report on the hype cycle of emerging technologies, blockchain has just passed the peak of their hype cycle curve. If you read the news articles about it, one would think it has taken over the technology world. No disruptive technology is without its challenges and potential impediments t...
CloudEXPO New York 2018, colocated with DevOpsSUMMIT and DXWorldEXPO New York 2018 will be held November 12-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI and Machine Learning to one location.
Hackers took three days to identify and exploit a known vulnerability in Equifax’s web applications. I will share new data that reveals why three days (at most) is the new normal for DevSecOps teams to move new business /security requirements from design into production. This session aims to enlighten DevOps teams, security and development professionals by sharing results from the 4th annual State of the Software Supply Chain Report -- a blend of public and proprietary data with expert researc...
DXWorldEXPO LLC announced today that Nutanix has been named "Platinum Sponsor" of CloudEXPO | DevOpsSUMMIT | DXWorldEXPO New York, which will take place November 12-13, 2018 in New York City. Nutanix makes infrastructure invisible, elevating IT to focus on the applications and services that power their business. The Nutanix Enterprise Cloud Platform blends web-scale engineering and consumer-grade design to natively converge server, storage, virtualization and networking into a resilient, softwar...
So the dumpster is on fire. Again. The site's down. Your boss's face is an ever-deepening purple. And you begin debating whether you should join the #incident channel or call an ambulance to deal with his impending stroke. Yes, we know this is a developer's fault. There's plenty of time for blame later. Postmortems have a macabre name because they were once intended to be Viking-like funerals for someone's job. But we're civilized now. Sort of. So we call them post-incident reviews. Fires are ne...
The digital transformation is real! To adapt, IT professionals need to transform their own skillset to become more multi-dimensional by gaining both depth and breadth of a wide variety of knowledge and competencies. Historically, while IT has been built on a foundation of specialty (or "I" shaped) silos, the DevOps principle of "shifting left" is opening up opportunities for developers, operational staff, security and others to grow their skills portfolio, advance their careers and become "T"-sh...
This session will provide an introduction to Cloud driven quality and transformation and highlight the key features that comprise it. A perspective on the cloud transformation lifecycle, transformation levers, and transformation framework will be shared. At Cognizant, we have developed a transformation strategy to enable the migration of business critical workloads to cloud environments. The strategy encompasses a set of transformation levers across the cloud transformation lifecycle to enhance ...
Lori MacVittie is a subject matter expert on emerging technology responsible for outbound evangelism across F5's entire product suite. MacVittie has extensive development and technical architecture experience in both high-tech and enterprise organizations, in addition to network and systems administration expertise. Prior to joining F5, MacVittie was an award-winning technology editor at Network Computing Magazine where she evaluated and tested application-focused technologies including app secu...
Mike is managing director in Deloitte Consulting LLP's Cloud practice, responsible for helping clients implement cloud strategy and architecture to drive digital transformation. Beyond his technology experience, Mike brings an insightful understanding of how to address the organizational change, process improvement, and talent management challenges associated with digital transformation. Mike brings more than 30 years of experience in software development and architecture to his role. Most recen...