Spark Power Announces Record Quarterly Revenue and EBITDA

Third Quarter revenue grows 36% Year over Year to $52.1 million
Third Quarter Adjusted EBITDA grows 12.5% Year over Year to $8.2 million

(Spark Power reports in Canadian dollars unless otherwise specified)

OAKVILLE, ON, Nov. 12, 2019 /CNW/ - Spark Power Group Inc. (TSX: SPG), parent company of Spark Power Corp. ("Spark Power" or the "Company"), today announced record financial results for the three and nine-month periods ended September 30, 2019.  

"Going into the year, we committed to investing in building an operating platform that could scale through the next few years of growth.  I am very proud of the team's accomplishments throughout this year.  Building this platform while significantly growing the business presented significant challenges during the first half of the year.  However, as a result of the team's hard work and perseverance, we are now seeing Spark Power really start to take shape as an integrated platform," said Jason Sparaga, Co-Founder and Co-CEO, Spark Power Corp. 

"With the majority of capital expenditures behind us, the evidence is clear in the financial results—including the acquisitions of 3-Phase and One Wind, and the recent integration benefits, Spark Power now has an annual run rate in excess of $210 million of revenue and $33.5 million of EBITDA, with further gains expected in the coming quarters. The business is very well positioned, both financially and operationally, and I am truly excited by what we will accomplish in 2020," added Sparaga.   

"Our record performance in the third quarter is a direct result of our ongoing investments in growth and integration initiatives.  We have focused on maintaining our momentum, while exercising the discipline to manage our costs to ensure our growth remains scalable and profitable. We will leverage the strong foundation we are building to generate strong free cash flow supported by focused working capital management and prudent capital allocation to support our growth objectives" said Dan Ardila, CFO, Spark Power Corp. "Making these investments requires the continued support of our financial stakeholders.    The expanded debt facilities from Bank of Montreal and the $5.5 million raised in the Rights Offering from our committed, long-term shareholders provided the capital to complete our most recent acquisition and fund other growth initiatives and clearly demonstrates an ongoing confidence in our team."

Financial Highlights

• Record quarterly revenue at $52.1 million, as compared to $38.3 million from the comparable quarter in 2018 representing a $13.8 million (36%) increase.
• Strong dual-pronged year-over-year revenue growth with organic growth of 23%, and growth from acquisitions of 12.5%.
• Proceeds from Rights Offering of $5.5 million along with recent amendments to the Company's credit facilities, support deleveraging and improved liquidity.
• Managed selling, general and administration costs to $13.2 million (25.3% of revenue) representing a decline of 3.8% from 29.1% in the second quarter of 2019 (at 29.1% of revenue).

Business Highlights—Operations

• Launched a reorganization of our business units, along Regional Lines, creating opportunities for structural cost reductions and supporting the longer-term scalability of the business
• Regional leaders have all been appointed
• Transition is currently underway and expected to be fully realized by the end of Q1 2020.
• Ended the quarter with 25 branches in Canada and 4 branches in the United States
• Expanded our geographic footprint in Southwestern Ontario with a new regional 'hub' in London, ON delivering Pole-to-Product™ electrical services and power solutions to industrial customers in the area.
• US business has tripled over previous year and significant business development activities are being conducted from North Carolina (Raleigh), California (Fremont, Fresno), and Texas (San Antonio). US leadership team appointed in California and Texas, supporting regional growth.
• Launched our Trusted Partner in Power^TM brand promise, positioning Spark as our customers' first and only choice for all their power needs.

Business Highlights—Corporate Development

• The Company successfully executed a Rights Offering, raising gross proceeds of $5.5M
• Acquired 3-Phase, further expanding our geographic coverage in Western Canada and rounding out our capabilities in base building construction and low-voltage electrical services in the region.
• 3-Phase financial performance has exceeded expectations since the close of the acquisition, generating revenue of $4.8 million and EBITDA of $1.1 million in the two months since being acquired.
• Subsequent to the close of the quarter, announced the acquisition of One Wind (effective November 1, 2019):
• Total purchase price of $17.0 million including $4.0 million of performance-based consideration.
• Complements our existing Northwind renewable business and extends our geographic coverage in the Southwestern United States (particularly in Texas).
• On a trailing twelve-month basis at closing, One Wind generated approximately $24M in revenue and adjusted EBITDA of $4.4M, making this transaction highly accretive to Spark Power.

Quarterly Conference Call

Management is hosting an investor conference call and webcast tomorrow, November 13, 2019, at 8:30 a.m. ET to discuss its financial results in greater detail. To join by telephone dial: [phone] (toll-free in North America) or [phone] (local and international), with conference ID: 3476509. To listen to a live webcast of the call, please visit the investor relations section of Spark Power's website at https://sparkpowercorp.com/about-us/investor-relations/. An archived replay of the webcast will be available following the conclusion of the call.

Please dial in or log on 10 minutes prior to the start time to provide sufficient time to register for the event.

Spark Power's Third-Quarter 2019 Interim Unaudited Condensed Consolidated Financial Statements and Notes of its Third-Quarter 2019 Management Discussion and Analysis are available on Spark Power's website at www.sparkpowercorp.com, and will be filed on SEDAR at www.sedar.com. 

About Spark Power

Spark Power is the leading independent provider of end-to-end electrical contracting, operations and maintenance services, and energy sustainability solutions to the industrial, commercial, utility, and renewable asset markets in North America. We work to earn the right to be our customers' Trusted Partner in Power™. Our highly skilled and dedicated people, located in the communities we serve, combined with our knowledge of the power industry, technology expertise, and commitment to safety, ensures we deliver the right solutions that keep our customers' operations up and running today and better equipped for tomorrow. Learn more at www.sparkpowercorp.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 six months ended September 30, 2019. The non-IFRS measures should not be construed as alternatives to results prepared in accordance with IFRS.

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 Ardila.

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. Several 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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019	2018	% Change		2019	2018	% Change
Revenue	$52,045,402	$38,268,707	36.0%		$130,592,099	$81,849,796	59.6%
Gross Profit	18,314,485	13,769,593	33.0%		46,314,626	29,594,717	56.5%
Gross Profit Margin	35.2%	36.0%			35.5%	36.2%
Selling, General & Administration	13,176,567	8,750,192	50.6%		37,753,570	21,760,265	73.5%
Income from Operations	5,137,918	5,019,401	2.4%		8,561,056	7,834,452	9.3%
EBITDA ^(1)	6,812,120	(33,988,675)	120.0%		11,885,365	(56,037,357)	121.2%
EBITDA Margin ^(1)	13.1%	-88.8%			9.1%	(68.5%)
Adjusted EBITDA ^(1)	8,228,830	7,313,706	12.5%		16,938,320	14,473,103	17.0%
Adjusted EBITDA Margin ^(1)	15.8%	19.1%			13.0%	17.7%
Pro-forma Adjusted EBITDA ^(1)	8,546,854	7,891,971	8.3%		18,900,950	21,086,822	(10.4%)
Pro-forma Adjusted EBITDA Margin ^(1)	15.7%	18.3%			13.3%	19.4%
Pro-forma Revenue ^(1)	54,442,993	43,159,142	26.1%		141,931,385	108,528,479	30.8%
	Nine Months Ended September 30,
	2019	2018
Bank Indebtedness	20,131,995	4,999,979
Senior Secured Long-term Debt	56,039,578	44,000,000
Total Debt ^(2)	92,194,964	60,733,506
^1EBITDA, Adjusted EBITDA, Pro-forma Adjusted EBITDA, Adjusted EBITDA Margin,
Pro-forma Adjusted EBITDA Margin, Pro-forma Revenue,
and Adjusted Working Capital are non-IFRS measures. Refer to Non-IFRS measures for definitions of these terms.
^2Total debt includes Bank indebtedness, long-term debt and promissory notes.

Reconciliation of net and comprehensive income (loss) to EBITDA, Adjusted EBITDA, and Pro-forma Adjusted EBITDA

Reconciliation of net and comprehensive income (loss) to EBITDA, Adjusted EBITDA and Pro-forma Adjusted EBITDA	Three months ended September 30,			Nine months ended September 30,
	2019	2018		2019	2018
Net and comprehensive income (loss)	$2,619,718	($37,619,051)		($38,821)	($64,923,409)
Adjustments:
Finance expense	1,281,597	1,477,690		3,878,405	3,473,243
Income tax expense	(68,560)	(126,058)		(247,193)	(196,117)
Amortization	2,979,365	2,278,744		8,292,974	5,608,926
EBITDA	6,812,120	(33,988,675)		11,885,365	(56,037,357)
EBITDA Margin	13.1%	-88.8%		9.1%	-68.5%
Adjustments:
Increase in value of Puttable Class A and Class 1 Special shares	-	20,654,400		-	47,771,600
Transaction costs	905,329	9,157,399		1,441,574	10,269,633
Excess of fair value over net asset acquired	-	12,660,331		-	12,660,331
Gain on retraction of class 1 special shares	-	(1,250,000)		-	(1,250,000)
Reorganization costs	511,381	-		1,511,381	-
Earn-out	-	-		2,100,000	-
Other non-recurring costs	-	80,251		-	1,058,896
Adjusted EBITDA	8,228,830	7,313,706		16,938,320	14,473,103
Adjusted EBITDA Margin	15.8%	19.1%		12.9%	17.7%
Other adjustments:
Pre-acquisition EBITDA from acquistions	318,024	578,265		1,962,630	6,675,232
Pro-forma Adjusted EBITDA	$8,546,854	$7,891,971		$18,900,950	$21,148,335
Pro-forma Adjusted EBITDA Margin	15.7%	18.3%		13.2%	17.4%

The following tables summarize Spark Power's results for the periods indicated:

Statement of Net Comprehensive Income (loss)	3 Months Ended September 30,			9 Months Ended September 30,
	2019	2018		2019	2018
Revenue	$52,045,402	$38,268,707		$130,592,099	$81,849,796
Cost of sales	33,730,917	24,499,114		84,277,473	52,255,079
Gross profit	18,314,485	13,769,593		46,314,626	29,594,717
Selling, general and administrative expenses	13,176,567	8,750,192		37,753,570	21,760,265
Income from operations	5,137,918	5,019,401		8,561,056	7,834,452
Finance costs	(1,281,597)	(1,477,690)		(3,878,405)	(3,473,243)
Increase in value of Puttable Class A and Class 1 Special shares	-	(20,654,400)		-	(47,771,600)
Transaction costs	(905,329)	(9,157,399)		(1,441,574)	(10,269,633)
Excess of fair value over net asset acquired	-	(12,660,331)		-	(12,660,331)
Gain on retraction of Class 1 special shares	-	1,250,000		-	1,250,000
Reorganization costs	(511,381)	-		(1,511,381)	-
Earn-out	-	-		(2,100,000)	-
Other	111,547	(64,690)		84,290	(29,171)
	(2,586,760)	(42,764,510)		(8,847,070)	(72,953,978)
Income (loss) before income taxes	2,551,158	(37,745,109)		(286,014)	(65,119,526)
Income tax expense (recovery):
Current	2,029,889	685,243		593,887	1,481,064
Deferred	(2,098,449)	(811,301)		(841,080)	(1,677,181)
	(68,560)	(126,058)		(247,193)	(196,117)
Net and comprehensive income (loss)	$2,619,718	($37,619,051)		($38,821)	($64,923,409)
EBITDA	6,812,120	(33,988,675)		11,885,365	(56,037,357)
EBITDA margin	13.1%	-88.8%		9.1%	-68.5%
Adjusted EBITDA	8,228,830	7,313,706		16,938,320	14,473,103
Adjusted EBITDA margin	15.8%	19.1%		13.0%	17.7%
Pro-forma Adjusted EBITDA	8,546,854	7,891,971		18,900,950	21,086,822
Pro-forma Adjusted EBITDA margin	15.7%	18.3%		13.3%	17.4%
Pro-forma Revenue	54,442,993	43,159,142		141,931,385	121,283,724

SOURCE Spark Power Group Inc.

Investor & Regulatory Inquiries: Dan Ardila, Chief Financial Advisor, [email protected], [phone] x127; Media Inquiries: Natasha McNabb, Corporate Communications Specialist, [email protected], [phone]