Spark Power Reports Q4 and Fiscal 2018 Results
Spark Power Reports Q4 and Fiscal 2018 Results
Canada NewsWire
OAKVILLE, ON, March 27, 2019
- Q4 and fiscal year revenue up 71.0% and 49.6% over prior year periods, respectively
- LTM Pro-forma Adjusted EBITDA of $25.4 million exceeded target of $25.0 million
OAKVILLE, ON, March 27, 2019 /CNW/ - Spark Power Group Inc. (TSX: SPG, SPG.WT), parent company to Spark Power Corp. ("Spark Power" or the "Company"), a leading independent provider of integrated power solutions to industrial, commercial and institutional customers across North America, today announced its financial results for the three- and twelve-month periods ended December 31, 2018. All amounts are in Canadian dollars unless otherwise specified.
Recent Highlights
Highlights for the 2018 year and period subsequent to year-end include:
- Consolidated revenue growth of 49.6%, from $80.0 million in 2017 to $119.8 million in 2018;
- Adjusted EBITDA growth of 2.6% from $5.9 million (Adjusted EBITDA margin of 26.6%) in in 2017 to $6.0 million (Adjusted EBITDA margin of 15.9%) in 2018 (see "Non-IFRS measures");
- Closing of the Qualifying Acquisition, pursuant to which Spark Power merged with Canaccord Genuity Acquisition Corp. ("CGAC") and began trading on the Toronto Stock Exchange as Spark Power Group Inc.;
- Closing of $90 million in secured debt facilities with the Bank of Montreal;
- Acquisition of Edmonton, Alberta-based power systems engineering and technical field services provider, Orbis Engineering Field Services Ltd. ("Orbis");
- Acquisition of leading green energy provider, Toronto, Ontario-based, Bullfrog Power Inc. ("Bullfrog");
- Acquisition of two low voltage New Electric branches in California ("NEF");
- Award of a multi-year capital maintenance contract to wholly-owned subsidiary Orbis by Alberta's largest electricity provider, AltaLink; and
- Grand opening of the New Electric Winnipeg, Manitoba branch.
"2018 was a transitional year for Spark Power as we put in place the key elements to support the next phase of our multi-year vision for the Company and simultaneously executed on our strategy focused on driving balanced growth through a combination of organic initiatives and acquisitions," said Jason Sparaga, co-CEO of Spark Power Corp. "Our financial results for the year reflect both meaningful improvement to the top line, with pro-forma revenue exceeding $146 million, and our ability to deliver profitable growth as we exceeded our pro-forma Adjusted EBITDA target for the 2018 year."
"The way our industrial customer base accesses, consumes and pays for power continues to change rapidly as the grid of the future continues to evolve," said Andrew Clark, co-CEO of Spark Power Corp. "Our focus both now and in the years ahead will be on helping customers manage their critical power infrastructure and ensuring that their supply is sustainable, high quality, reliable and cost-effective. The future is focused on the customer and ensuring that their supply meets each of these criteria. In April, we are hosting our inaugural Future of Power event that will help thought leaders, customers, OEMs and generators of power have meaningful conversations about how the industry will evolve in the weeks, months and years ahead."
Selected Financial Information
Three months ended Twelve months ended December 31, December 31, 2018 2017 % Change 2018 2017 % Change Revenue $ 37,909,647 $ 22,175,002 71.0% $ 119,759,443 $ 80,043,576 49.6% Gross Profit 15,573,718 10,170,337 53.1% 46,025,262 34,738,760 32.5% Gross Profit Margin 41.1% 45.9% 38.4% 43.4% Selling, General and Administration 11,964,457 6,257,128 91.2% 34,581,546 27,312,587 26.6% Income from Operations 3,609,261 3,913,209 -7.8% 11,443,716 7,426,173 54.1% Adjusted EBITDA(1) 6,043,300 5,888,024 2.6% 20,516,406 15,441,700 32.9% Adjusted EBITDA Margin(1) 15.9% 26.6% 17.1% 19.3% Pro-forma Adjusted EBITDA 6,043,300 6,672,425 -9.4% 25,409,190 20,975,241 21.1% Pro-forma Adjusted EBITDA Margin(1) 15.9% 20.1% 17.4% 16.8% Pro-forma Revenue(1) 37,909,647 33,164,273 14.3% 146,450,621 125,110,463 17.1% Adjusted Net and Comprehensive Income (Loss) 1,702,478 2,395,927 6,230,636 1,106,482 As at December 31, 2018 2017 Adjusted Working Capital (non-cash)(1) 28,669,159 10,691,697 Net (Bank Indebtedness) Cash (11,666,604) 3,126,617 Senior Secured Long-term Debt 44,000,000 29,440,000 Total Debt(2) 71,018,561 49,931,253
1EBITDA, Adjusted EBITDA, Pro-forma Adjusted EBITDA, Adjusted EBITDA margin, Pro-forma Adjusted EBITDA Margin, Adjusted Net and Comprehensive Income (Loss), Pro-forma Revenue and Adjusted Working Capital are non-IFRS measures. Refer to Non-IFRS measures for definitions of these terms | ||||||||||
2Total debt includes, long-term debt, lease liability and promissory notes |
Financial Review
Revenue in the fourth quarter ended December 31, 2018 was $37.9 million, compared with $22.2 million in the fourth quarter of 2017, representing an increase of $15.7 million or 71.0%. Effective July 1, 2018 the Company completed the acquisitions of Orbis, Bullfrog and NEF which contributed $13.6 million or 61.3% to the revenue increase. The balance of the revenue growth in Q4 2018 of $2.1 million was attributable to organic growth representing an organic growth rate of 9.6%. Revenue for the twelve months ended December 31, 2018 was $119.8 million compared with $80.0 million in the first twelve months of 2017, representing an increase of $39.7 million or 49.6%. The impact of the acquisitions noted earlier contributed $25.8, million or 32.2%, of the revenue increase. The balance of the revenue growth for the twelve months ended December 31, 2018 of $13.9 million was attributable to organic growth, representing an organic growth rate of 17.4%. Organic growth was driven by the Services Group, primarily continued growth in the New Electric low voltage electrical services, which was driven by new branch openings and expanding business with existing customers.
Gross profit in the fourth quarter of 2018 was $15.6 million, or 41.1% of revenue, compared with $10.2 million, or 45.9%, in the fourth quarter of 2017, representing an increase of $5.4 million or 53.1%. Gross profit for the year was $46.0 million, or 38.4% of revenue, compared with $34.7 million, or 43.4%, of revenue in fiscal 2017, representing an increase of $11.3 million or 32.5%. The gross profit percentage declines were primarily attributable to the impact of lower gross margin realizations of 22% from the Orbis business compared to other business units. This impacted overall gross margin by 5.1% in the quarter and 1.6% year to date. In addition, fourth quarter 2017 gross profit margins were abnormally high due to various year-end adjustments.
Selling, general and administration expenses for the fourth quarter of 2018 were $12.0 million, or 31.6% of revenue, compared with $6.3 million, or 28.2% of sales, in the fourth quarter of 2017, representing an increase of $5.7 million or 91.2%. The absolute dollar increase was attributable to the impact of the 2018 acquisitions. The percentage increase was attributable primarily to the impact of Bullfrog Power as all costs associated with this business are included in selling, general and administration. Selling, general and administration expenses were $34.6 million, or 28.9% of revenue in fiscal 2018, compared with $27.3 million, or 34.1% of revenue, in the same period of the prior year, representing an increase of $7.3 million or 26.6%. The absolute dollar increase was attributable to the impact of the 2018 acquisitions. The percentage decline was attributable to the scale achieved on the Company's base business, partially offset by the impact of Bullfrog Power's cost structure on selling, general and administration costs.
EBITDA for the three months ended December 31, 2018 was $4.6 million compared with ($12.2) million in the fourth quarter of 2017. The fourth quarter 2018 EBITDA reflects a $1.4 million charge for severances and other costs associated with a corporate-wide reorganization initiative. During the fourth quarter of 2017 the Company incurred a $17.8 million charge for the increase in value of puttable shares held by the Company at that time thereby driving a negative EBITDA result. EBITDA for fiscal 2018 was ($51.4) million compared with ($4.5) million in fiscal 2017. Both years were impacted by various non-recurring items discussed in detail in the Company's third quarter reporting.
For the three months ended December 31, 2018, Adjusted EBITDA was $6.0 million, or 15.9% of sales, compared with $5.9 million, or 26.6% of sales, in the fourth quarter of 2017, representing an increase of $0.2 million or 2.6%. The absolute dollar increase was attributable to the higher volumes achieved. The decline in Adjusted EBITDA margin percentage was attributable to the factors noted earlier that impacted gross profit margins. For the twelve months ended December 31, 2018 adjusted EBITDA was $20.5 million, or 17.1% of revenue, compared with$15.4 million, or 19.3% of revenue, in 2017, representing an increase of $5.1 million or 33.1%. The increase was attributable to higher volumes driving greater gross profit, despite lower gross margins realized, and scale achieved on selling, general and administration costs.
Pro-forma adjusted EBITDA was $6.0 million, or 15.9% of pro-forma revenue, compared with $6.7 million, or 20.1% of pro-forma revenue, in the fourth quarter of 2017, representing a decrease of $0.7 million or 9.4%. Pro-forma adjusted EBITDA for fiscal 2018 was $25.4 million, or 17.4% of pro-forma revenue, compared with $21.0 million, or 16.8% of pro-forma revenue, in fiscal 2017, representing an increase of $4.4 million or 21.1%.
The Company generated Adjusted Net and Comprehensive Income in the three and twelve months ended December 31, 2018 of $1.7 million and $2.4 million, respectively. The Company incurred a net and comprehensive income (loss) in the three- and twelve-month periods ended December 31, 2018 of $0.3 million and ($64.6) million, respectively, as a result of various non-recurring expenses of $1.4 million and $72.0 million being incurred in the noted periods. These non-recurring expenses related to the accounting impact of puttable shares, the retraction of shares from a previous shareholder, and costs associated with the merger with CGAC and acquisition activities completed in the third quarter and reorganization costs incurred in the fourth quarter.
Total Senior Secured Long-term Debt increased to $44.0 million at December 31, 2018 compared with $29.4 at December 31, 2017 and reflects the re-financing completed in the third quarter.
Total Long-term Debt was $71.0 million at December 31, 2018, compared with $49.9 million at December 31, 2017. Total long-term debt at December 31, 2018 included term debt of $45.0 million, promissory notes of $10.2 million and lease liability of $15.7 million. In addition the Company had drawn $11.7 million on its operating line.
Conference Call Details
Management is hosting an investor conference call and webcast on Thursday, March 28, 2019 at 8:30 a.m. ET to discuss its financial results in greater detail. To join by telephone dial: +1 (888) 231-8191 (toll-free in North America) or +1 (647) 427-7450 (local and international). To listen to a live webcast of the call, please go to: https://event.on24.com/wcc/r/1965222/0E2A1638DB4FA924BE97B2E61CC725D0. Please dial in or log on 10 minutes prior to the start time to provide sufficient time to register for the event.
A replay of the conference call will be available from approximately noon ET on Thursday, March 28, 2019 until 11:59 pm ET on Thursday, April 4, 2019 by dialing +1 (855) 859-2056 (toll-free in North America) or +1 (416) 849-0833 (Local and International) by entering the passcode 7754419.
2018 Fourth Quarter and Full Year Disclosure Documents
Spark Power's full year MD&A and audited consolidated financial statements for the twelve months ended December 31, 2018, along with previous public filings of Spark Power and Canaccord Genuity Acquisition Corp., may be found on SEDAR at www.sedar.com.
Non-IFRS Measures
The Company prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, the Company also discloses and discusses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS. These include: "EBITDA", "Adjusted EBITDA", "Pro-forma Adjusted EBITDA","EBITDA Margin", "Adjusted EBITDA Margin", "Pro-forma Adjusted EBITDA Margin", "Pro-forma Revenue", "Adjusted Working Capital", and "Adjusted Net and Comprehensive Income (Loss)". These non-IFRS measures are used to provide investors with supplemental measures of Spark Power's operating performance and highlight trends in Spark Power's business that may not otherwise be apparent when relying solely on IFRS measures. Spark also believes that providing such information to securities analysts, investors and other interested parties who frequently use non-IFRS measures in the evaluation of issuers will allow them to better compare Spark Power's performance against others in its industry. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. For a reconciliation of these non-IFRS measures see the Company's management's discussion and analysis for the three and twelve months ended December 31, 2018. The non-IFRs measures should not be construed as alternatives to results prepared in accordance with IFRS.
About Spark Power Corp.
Spark Power Corp. (TSX: SPG, SPG.WT) is a leading independent provider of integrated power solutions to industrial, commercial and institutional customers across North America. Spark Power's 750+ employees help deliver powerful solutions that reduce costs, make the environment a priority and empower our 6,500 + customers to transition to the grid of the future. Learn more at www.sparkpowercorp.com.
Caution Regarding Forward-Looking Statements
This news release may contain forward-looking statements (within the meaning of applicable securities laws) which reflect Spark Power's current expectations regarding future events. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements are based on Spark Power's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the future success of the Company's business, including revenue growth, synergistic savings expected to be realized, potential expansion of the business and include, without limitation, statements regarding the growth and financial performance of Spark Power's business and execution of its business strategy by Messrs. Sparaga and Clark.
The forward-looking statements in this news release are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, Spark Power assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Selected Consolidated Financial Information
The following tables summarizes Spark Power's recent results for the periods indicated:
For the Three-Months Ended | For the Twelve-Months Ended | ||||||||
December 31, | December 31, | ||||||||
Consolidated statements of loss and | 2018 | 2017 | 2018 | 2017 | |||||
Revenue | $ | 37,909,647 | $ | 22,175,002 | $ | 119,759,443 | $ | 80,043,576 | |
Cost of sales | 22,335,929 | 12,004,665 | 73,734,181 | 45,304,816 | |||||
Gross profit | 15,573,718 | 10,170,337 | 46,025,262 | 34,738,760 | |||||
Selling, general and administrative expenses | 11,964,457 | 6,257,128 | 34,581,546 | 27,312,587 | |||||
Income from operations | 3,609,261 | 3,913,209 | 11,443,716 | 7,426,173 | |||||
Other income (expenses): | |||||||||
Finance costs | (1,736,717) | (1,098,682) | (5,209,960) | (4,573,151) | |||||
Increase in value of puttable class A and Class 1 shares | - | (17,816,420) | (47,771,600) | (17,816,420) | |||||
Transaction costs | - | - | (10,269,633) | - | |||||
Reorganization costs | (1,413,924) | - | (1,413,924) | - | |||||
Excess of fair value over net asset acquired | - | - | (12,660,331) | - | |||||
Gain on retraction of Class 1 special shares | - | - | 1,250,000 | - | |||||
Other | (108,881) | 4,776 | (138,052) | (53,061) | |||||
(3,259,522) | (18,910,326) | (76,213,500) | (22,442,632) | ||||||
Income (loss) before income taxes | 349,739 | (14,997,117) | (64,769,784) | (15,016,459) | |||||
Income tax expense: | |||||||||
Current | (803,829) | 190,714 | 677,235 | 762,885 | |||||
Deferred | 865,014 | 232,649 | (812,167) | 930,594 | |||||
61,185 | 423,363 | (134,932) | 1,693,479 | ||||||
Net income (loss) and comprehensive income (loss) | 288,554 | (15,420,480) | (64,634,852) | (16,709,938) | |||||
For the Three-Months Ended | For the Twelve-Months Ended | ||||
December 31, | December 31, | ||||
Reconciliation of net and comprehensive income | 2018 | 2017 | 2018 | 2017 | |
Net and comprehensive income (loss) | $288,554 | ($15,420,493) | ($64,634,852) | ($16,709,938) | |
Adjustments to net and comprehensive income (loss): | |||||
Increase in value of puttable class A and Class 1 shares | - | 17,816,420 | 47,771,600 | 17,816,420 | |
Transaction costs | - | - | 10,269,633 | - | |
Reorganization costs | 1,413,924 | - | 1,413,924 | ||
Excess of fair value over net asset acquired | - | - | 12,660,331 | - | |
Gain on retraction of Class 1 special shares | - | - | (1,250,000) | - | |
Adjusted net and comprehensive income (loss) | $1,702,478 | $2,395,927 | $6,230,636 | $1,106,482 | |
For the Three-Months Ended | For the Twelve-Months Ended | ||||
December 31, | December 31, | ||||
Reconciliation of net income (loss) to EBITDA, | 2018 | 2017 | 2018 | 2017 | |
Net income (loss) and comprehensive income (loss) | $288,554 | ($15,420,493) | ($64,634,852) | ($16,709,938) | |
Amortization | 2,542,920 | 1,714,552 | 8,151,846 | 5,955,556 | |
Finance costs | 1,736,717 | 1,098,682 | 5,209,960 | 4,573,151 | |
Income tax expense | 61,185 | 423,376 | (134,932) | 1,693,479 | |
EBITDA | 4,629,376 | (12,183,883) | (51,407,978) | (4,487,752) | |
Adjustments to EBITDA: | |||||
Increase in value of puttable class A and Class 1 shares | - | 17,816,420 | 47,771,600 | 17,816,420 | |
Transaction costs | - | - | 10,269,633 | - | |
Reorganization costs | 1,413,924 | - | 1,413,924 | - | |
Excess of fair value over net asset acquired | - | - | 12,660,331 | - | |
Gain on retraction of Class 1 special shares | - | - | (1,250,000) | - | |
Other non-recurring costs | - | 255,488 | 1,058,896 | 2,113,032 | |
Adjusted EBITDA | 6,043,300 | 5,888,025 | 20,516,406 | 15,441,700 | |
Pre-acquisition EBITDA for 3 Acquisitions | - | 784,401 | 4,892,784 | 5,533,541 | |
Pro-forma Adjusted EBITDA | $6,043,300 | $6,672,426 | $25,409,190 | $20,975,241 | |
SOURCE Spark Power Group Inc.
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/March2019/27/c1857.html
Please make the indicated changes including the new text: US quotes snapshot data provided by IEX. Additional price data and company information powered by Twelve Data.
