Spark Power Reports Q1 2019 Results
- Q1 revenue up 73.7% over Q1 2018
- EBITDA increased to $3.2 million as compared to $2.3 million in Q1 2018
OAKVILLE, ONTARIO – May 14, 2019 – 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-month period ended March 31, 2019. All amounts are in Canadian dollars unless otherwise specified.
Highlights for the first quarter of 2019 and subsequent period include:
- Consolidated revenue growth of 73.7%, from $19.7 million in 2018 to $34.3 million in 2019;
- Adjusted EBITDA growth of 41.0% from $2.3 million (Adjusted EBITDA margin of 11.5%) in the first quarter of 2018 to $3.2 million (Adjusted EBITDA margin of 9.4%) in the first quarter of 2019 (see “Non-IFRS measures”);
- Decline in overall gross margins due to short term pressure on margin realizations in the Technical Services Group offset by strong margin contribution from the Power Advisory and Sustainability group;
- Hosted the first annual “Future of Power” Conference—a sold-out event attended by over 500 business, technology, sustainability, government, academics, and students;
- Appointed Ron Dizy as Chief Strategy Officer and will be leading corporate strategy, marketing and business development;
- Advanced U.S. longer-term expansion strategy through establishment of new U.S. corporate head office in Raleigh, North Carolina and planned branch openings.
“We are very pleased with the organic revenue growth across every one of our business units. We continue to validate our strategy of acquiring great small businesses and growing them by leveraging our corporate platform,” said Jason Sparaga, Co-CEO. “Logically, with these smaller businesses, we will see some variability in operating results on a short-term basis. We remain focused on the operational integration that will drive continued strong margins and profitability in the medium to long term,” added Sparaga.
“With customer and industry needs rapidly changing, Spark continues to drive thought leadership in the power sector by focusing on the electrification of everything,” said Andrew Clark, Co-Founder, Co-CEO, Spark Power Corp. To that end, Spark Power recently held its inaugural Future of Power conference at Toronto’s Evergreen Brick Works. The event was a massive success; customers continue to tell us that it was the best power conference they’ve been to in the last five years,” said Clark. The Future of Power is about the customer, and we are excited to help lead our customers on this journey to the grid of the future. As we continue to progress in our growth story,” continued Clark, “we are excited to welcome Ron Dizy as our newly appointed Chief Strategy Officer (CSO). Ron most recently comes to us from MaRS Advanced Energy Centre where he was the founding Managing Director, working with private industry, utilities, and government to drive higher levels of innovation adoption in the energy sector. As Spark Power’s CSO, Ron will lead corporate strategy, marketing, and business development; playing an invaluable role in helping us carry out our Company vision—to become the leading independent provider of integrated power solutions to the industrial, commercial, and institutional markets across North America”.
Selected Financial Information
Revenue for the three months ended March 31, 2019, was $34.3 million, compared with $19.7 million in the first quarter of 2018, representing an increase of $14.5 million or 73.7%. The acquisitions completed in July 2018 contributed $11.6 million or 59.0% of the revenue increase with Bullfrog Power accounting for $4.1 million, Orbis accounting for $5.9 million and New Electric Fresno accounting for $1.6 million. The balance of the revenue growth in Q1 2019 of $2.9 million was attributable to organic growth representing an increase of 14.7% compared to the first quarter of 2018.
Gross profit in the first quarter of 2019 was $12.4 million, or 36.2% of revenue, compared with $7.3 million or 37.0% in the first quarter of 2018 representing an increase of $5.1 million or 70.2%. The gross profit percentage decline was primarily attributable to the impact of lower gross margin realizations from the Orbis business compared to higher margins in the Bullfrog Power business, both of which were not included in the results for the first quarter of 2018 as they were acquired in Q3 2018. Excluding the impact of the acquisitions in the first quarter 2019 results, gross margins would have been 32.4% as compared to 37.0% realized in the first quarter of 2018 resulting from a decline in gross margin realized by New Electric in the quarter from 39% in the first quarter of 2018 to 33.2% in the first quarter of 2019.
Selling, general, and administrative expenses for the first quarter of 2019 were $11.7 million, or 34.2% of revenue, compared with $6.7 million, or 33.9% of revenue in the first quarter of 2018 representing an increase of $5.0 million or 74.8%. The absolute dollar increase was attributable primarily to the impact of the 2018 acquisitions. As a percentage of revenue, selling, general, and administrative costs were driven primarily by scale, achieved as a result of increased revenues— partially offset by the impact of Bullfrog Power as all costs associated with this business are included in selling, general, and administration.
Amortization and depreciation for the three months ended March 31, 2019, was $2.6 million compared with $1.7 million over the same period in 2018. The increase reflects the impact of amortization and depreciation on tangible and intangible assets that arose from the acquisitions completed during 2018, with the balance of the increase driven by the additions of equipment, right of use vehicles, and property.
Finance costs in the first quarter were $1.3 million as compared to $1.1 million in the first quarter of 2018. The increase was attributable primarily to the inclusion of an unrealized mark-to-market swap cost of $121,978 incurred in the quarter on a $22.0 million interest rate swap required under the Company’s credit facility.
EBITDA for the three months ended was $3.2 million or 9.4% of revenue compared with ($16.3) million in the first quarter of 2018. During the first quarter of 2018, the Company incurred an $18.6 million charge for the increase in value of puttable shares held by the Company at that time.
For the three months ended March 31, 2019, Adjusted EBITDA was $3.2 million, or 9.4% of revenue, compared with $2.3 million, or 11.5%, of revenue in the first quarter of 2018, representing an increase of $0.9 million or 39.1%.
Pro-forma adjusted EBITDA was $3.2 million or 9.4% of pro-forma revenue compared with $4.3 million or 13.7% of pro-forma revenue in the first quarter of 2018, representing a decrease of $1.1 million or 25.6%.
The Company generated Adjusted Net and Comprehensive loss in the three months ended March 31, 2019, of ($0.5) million compared to ($0.6) million over the same period in 2018. The Company incurred a net and comprehensive loss in the three-month period ended March 31, 2019, of ($0.5) million compared to ($19.3) million in the first quarter of 2018.
Total Senior Secured Long-term Debt, excluding lease liability, was $44.0 million at March 31, 2019, compared with $29.2 at March 31, 2018, and was consistent with amounts outstanding at December 31, 2018.
Total Debt, which includes long-term debt, lease liabilities, and promissory notes, was $73.7 million at March 31, 2019, compared with $49.0 million at March 31, 2018. Total debt at March 31, 2019, included term debt of $45.5 million, promissory notes of $10.2 million and lease liability of $17.9 million. In addition, the Company had drawn $14.7 million on its operating line compared to $11.7 million at December 31, 2018. The increase was comprised of investment in capital expenditures of $3.0 and payment of lease liabilities of $1.1 million, partially offset by cash flows from operating activities of $1.1 million.
Conference Call Details
Management is hosting an investor conference call and webcast on Wednesday, May 15, 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), with conference ID: 9798037. To listen to a live webcast of the call, please click here:
Please dial in or log on 10 minutes prior to the start time to provide sufficient time to register for the event.
For those unable to listen to the live webcast, an archive will be made available on the Events and Presentations section of the Company’s investor website at http://sparkpowercorp.com/about-us/investors/events-presentations/. The recording will be made available shortly after the conclusion of the conference call and Annual General Meeting for a period of 90 days.
2019 First Quarter Documents
Spark Power’s first quarter MD&A and unaudited condensed consolidated interim financial statements for the three months ended March 31, 2019, along with previous public filings of Spark Power, may be found on SEDAR at www.sedar.com.
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 Group Inc.
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 summarize Spark Power’s recent results for the periods indicated:
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