Spark Power Reports Q2 2019 Results

• Q2 revenue up 85.7% over Q2 2018
• Adjusted EBITDA up 40.6% to $5.5 million

OAKVILLE, ON, Aug. 13, 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, institutional and utility customers across North America, today announced its financial results for the three and six month periods ended June 30, 2019.  All amounts are in Canadian dollars unless otherwise specified.

Recent Highlights

Highlights for the second quarter of 2019 and subsequent period include:

• Consolidated revenue growth of 85.7%, from $23.9 million in 2018 to $44.3 million in 2019;
• Organic revenue growth rates of 20.5% and 17.9% for the three and six month periods ended June 30, 2019;
• Adjusted EBITDA growth of 40.6% from $3.9 million (Adjusted EBITDA margin of 16.4%) in the second quarter of 2018 to $5.5 million (Adjusted EBITDA margin of 12.4%) in the second quarter of 2019 (see "Non-IFRS measures");
• Decline in overall gross and EBITDA margins due to pressure on margin realizations in the Technical Services Group and increased investment in selling, general and administration to support growth initiatives;
• Acquired 3-Phase Electrical Ltd. in August 2019 expanding the Company's western Canada presence.

"We are proud of our year over year business performance with consolidated revenue growth up 86%", said Jason Sparaga, Co-Founder, Co-CEO, Spark Power Corp. "We are a high-growth company and remain focused on supporting the growth initiatives that underpin our path for advancement which include: organic and acquisition growth, operational and brand integration, strengthening our balance sheet, operating as our customers' Trusted Partners in Power®, and driving a culture of ownership. The remainder of 2019 will be exciting as we work to integrate 3-Phase Electrical Ltd. with our operations, expand our geographic coverage and drive profitable growth," added Sparaga.

"We want to redefine how our customers think about, use, and generate their power," said Andrew Clark, Co-Founder, Co-CEO, Spark Power Corp. "The electrification of everything, the adoption of critical advanced manufacturing technologies, and the growing support for renewable power generation are three major sustained tailwinds for our business, and our opportunity for growth is stronger than ever. We are well on our way to becoming the leading independent provider of integrated power solutions to the industrial, commercial, institutional, and utility markets across North America," added Clark.

Selected Financial Information

	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		% Change		2019		2018		% Change
Revenue	$44,274,318		$23,846,670		85.7%		$78,546,697		$43,581,089		80.2%
Gross Profit	15,590,322		8,533,023		82.7%		28,000,141		15,825,124		76.9%
Gross Profit Margin	35.2%		35.8%				35.6%		36.3%
Selling, General & Administration	12,874,448		6,316,820		103.8%		24,577,003		13,010,073		88.9%
Income from Operations	2,715,874		2,216,203		22.5%		3,423,138		2,815,051		21.6%
EBITDA ^(1)	1,852,160		(5,719,320)		132.4%		5,078,780		(22,048,682)		123.0%
EBITDA Margin ^(1)	4.2%		-24.0%				6.5%		(50.6%)
Adjusted EBITDA ^(1)	5,488,405		3,902,854		40.6%		8,715,025		6,180,752		41.0%
Adjusted EBITDA Margin ^(1)	12.4%		16.4%				11.1%		14.2%
Pro-forma Adjusted EBITDA ^(1)	5,488,405		6,780,284		-19.1%		8,715,025		11,072,538		(21.3%)
Pro-forma Adjusted EBITDA Margin^(1)	12.4%		28.4%				11.1%		15.8%
Pro-forma Revenue ^(1)	44,274,318		38,884,305		13.9%		78,546,697		70,259,772		11.8%
	Six Months Ended June 30,
	2019		2018
Net (Bank Indebtedness) Cash	16,384,925		12,892,424
Senior Secured Long-term Debt	44,911,000		28,580,374
Total Debt ^(2)	76,425,554		49,937,664

1	EBITDA, 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.
2	Total debt includes, long-term debt, lease liability and promissory notes.

Financial Review

Revenue for the three months ended June 30, 2019, was $44.3 million, compared with $23.9 million in the second quarter of 2018, representing an increase of $20.4 million or 85.7%. The acquisitions completed in July 2018 contributed $15.5 million or 76.0% of the revenue increase with Bullfrog accounting for $3.5 million, Orbis accounting for $10.3 million and New Electric Fresno accounting for $1.7 million. The balance of the revenue growth in Q2 2019 of $4.9 million was attributable to organic growth representing an increase of 20.5% compared to the second quarter of 2018. Pro-forma revenue was $44.3 million in the second quarter of 2019 as compared to $38.9 million in 2018, representing organic growth of 13.9%.

Revenue for the six months ended June 30, 2019, was $78.6 million, compared with $43.6 million in 2018, representing an increase of $35.0 million or 80.2%. The acquisitions noted above contributed $27.2 million or 62.4% of the revenue increase with Bullfrog accounting for $7.6 million, Orbis accounting for $16.3 million and New Electric Fresno accounting for $3.3. The balance of the revenue growth in for the six months ended June 30, 2019, of $7.8 million was attributable to organic growth representing an increase of 17.9% compared to 2018. Pro-forma revenue was $78.5 million for the six months ended June 30, 2019, as compared to $70.3 million in 2018, representing organic growth of 11.8%.

Gross profit in the second quarter of 2019 was $15.6 million, or 35.2% of revenue, compared with $8.5 million or 35.8% in the second quarter of 2018 representing an increase of $7.1 million or 82.7%.

Gross profit for the six months ended June 30, 2019, was $28.0 million, or 35.7% of revenue, compared with $15.8 million or 36.3% in 2018 representing an increase of $12.2 million or 76.9%.

The gross profit percentage decline in both the three and six month periods ended June 30, was attributable primarily to the impact of lower gross margin realizations from the technical services group.

Selling, general and administrative expenses for the second quarter of 2019 were $12.9 million, or 29.1% of revenue, compared with $6.3 million, or 26.5% of revenue in the second quarter of 2018 representing an increase of $6.6 million or 104.8%. The absolute dollar increase was attributable primarily to the impact of the 2018 acquisitions with Bullfrog adding $1.8 million, Orbis $1.3 million and New electric Fresno $0.3 million. The balance of the increase was attributable to increases in other business units and corporate costs, partially offset by savings from the fall 2018 reorganization activities.

Selling, general and administrative expenses for the six months ended June 30, 2019, were $24.6 million, or 31.3% of revenue, compared with $13.0 million, or 29.9% of revenue in 2018 representing an increase of $11.6 million or 88.9%.

Amortization and depreciation for the three months ended June 30, 2019, was $2.8 million compared with $1.6 million over the same period in 2018. Amortization and depreciation for the six months ended June 30, 2019, was $5.3 million compared with $3.3 million over the same period in 2018. The increase reflects the impact of amortization and depreciation on fixed assets and intangible assets that arose from the acquisitions completed during 2018 with the balance of the increase was driven by additions of property and equipment and right of use vehicles and property.

Finance costs in the second quarter were $1.3 million as compared to $0.9 million in the second quarter of 2018. Finance costs in the six months ended June 30, 2019, were $2.6 million as compared to $2.0 million in 2018. The increase was attributable primarily to higher debt levels.

EBITDA for the three months ended was $1.9 million or 4.2% of revenue compared with ($5.7) million in the second quarter of 2018. During the second quarter of 2018, the Company incurred an $8.5 million charge for the increase in the value of puttable shares held by the Company at that time.

For the three months ended June 30, 2019, Adjusted EBITDA was $5.5 million, or 12.4% of revenue, compared with $3.9 million, or 16.4%, of revenue in the second quarter of 2018, representing an increase of $1.6 million or 40.6%.

Pro-forma adjusted EBITDA was $5.5 million or 12.4% of pro-forma revenue compared with $6.8 million or 17.4% of pro-forma revenue in the second quarter of 2018, representing a decrease of $1.3 million or 19.1%.

EBITDA for the six months ended was $8.8 million or 11.1% of revenue compared with ($22.1) million in 2018. During the six months ended June 30, 2018, the Company incurred a $27.1 million charge for the increase in the value of puttable shares held by the Company at that time.

For the six months ended June 30, 2019, Adjusted EBITDA was $8.7 million, or 11.1% of revenue, compared with $6.2 million, or 14.2%, of revenue in 2018, representing an increase of $2.6 million or 41.0%.

Pro-forma adjusted EBITDA was $8.7 million or 11.1% of pro-forma revenue compared with $11.1 million or 15.8% of pro-forma revenue in 2018, representing a decrease of $2.3 million or 21.3%.

The Company generated Net and Comprehensive loss in the three months ended June 30, 2019, of ($2.1) million compared to ($8.1) million over the same period in 2018. The Company incurred a net and comprehensive loss in the six-month period ended June 30, 2019, of ($2.7) million compared to ($27.3) million in the first quarter of 2018.

Total Senior Secured Long-term Debt, excluding lease liability, was $44.9 million at June 30, 2019, compared with $28.6 million at June 30, 2018, and was consistent with amounts outstanding at December 31, 2018. Total Debt, which includes long-term debt, lease liabilities, and promissory notes, was $76.4 million at June 30, 2019, compared with $50.0 million at June 30, 2018. Total debt at June 30, 2019, included term debt of $45.7 million, promissory notes of $13.1 million and lease liability of $17.6 million. In addition, the Company had drawn $16.4 million on its operating line compared to $11.7 million at December 31, 2018.

Conference Call Details
Management is hosting an investor conference call and webcast on Wednesday, August 14, 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: 8698378. 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 Second Quarter Documents

Spark Power's second quarter MD&A and unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2019, along with previous public filings of Spark Power, 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 six months ended June 30, 2019. 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 +6500 industrial, commercial, institutional, and utility customers across North America. We exist to be our customers' Trusted Partners in Power® by delivering customer-centric solutions that reduce costs, improve power quality and reliability, and promote sustainability. We strive to integrate new technologies and help transition our customers to the grid of the future. Learn more at www.sparkpowercorp.com and Like us on social @SparkPowerCorp.

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:

	3 Months Ended June 30,			6 Months Ended June 30,
	2019	2018		2019		2018
Revenue	$44,274,318	$23,846,670		$78,546,697		$43,581,089
Cost of sales	28,683,996	15,313,647		50,546,556		27,755,965
Gross profit	15,590,322	8,533,023		28,000,141		15,825,124
Selling, general and administrative expenses	12,874,448	6,316,820		24,577,003		13,010,073
Income from operations	2,715,874	2,216,203		3,423,138		2,815,051
Other income (expenses):
Finance costs	(1,307,642)	(897,481)		(2,596,808)		(1,995,553)
Increase in value of Puttable Class A and Class 1 Special shares	-	(8,509,940)		-		(27,117,200)
Transaction costs	(536,245)	(1,112,234)		(536,245)		(1,112,234)
Reorganization costs	(1,000,000)	-		(1,000,000)		-
Earn-out	(2,100,000)	-		(2,100,000)		-
Other	13,750	45,469		(27,257)		35,519
	(4,930,137)	(10,474,186)		(6,260,310)		(30,189,468)
Loss before income taxes	(2,214,263)	(8,257,983)		(2,837,172)		(27,374,417)
Income tax expense (recovery):
Current	(960,238)	334,123		(1,436,002)		795,821
Deferred	885,945	(535,603)		1,257,369		(865,880)
	(74,293)	(201,480)		(178,633)		(70,059)
Net and comprehensive loss	($2,139,970)	($8,056,503)		($2,658,539)		($27,304,358)
EBITDA	1,852,160	(5,719,320)		5,078,780		(22,048,682)
EBITDA Margin	4.2%	-24.0%		6.5%		-50.6%
Adjusted EBITDA	5,488,405	3,902,854		8,715,025		6,180,752
Adjusted EBITDA margin	12.4%	16.4%		11.1%		14.2%
Pro-forma Adjusted EBITDA	5,488,405	6,780,284		8,715,025		11,072,538
Pro-forma Adjusted EBITDA margin	12.4%	17.4%		11.1%		15.8%
Pro-forma Revenue	44,274,318	38,884,305		78,546,697		70,259,772

Reconciliation of net and comprehensive loss to EBITDA, Adjusted EBITDA and Pro-forma Adjusted EBITDA	3 Months Ended June 30,				6 Months Ended June 30,
	2019		2018		2019		2018
Net and comprehensive loss	($2,139,970)		($8,056,503)		($2,658,539)		($27,304,358)
Adjustments:
Finance expense	1,307,642		897,481		2,596,808		1,995,553
Income tax expense	(74,293)		(201,480)		(178,633)		(70,059)
Amortization	2,758,781		1,641,182		5,319,144		3,330,182
EBITDA	1,852,160		(5,719,320)		5,078,780		(22,048,682)
EBITDA Margin	4.2%		-14.7%		6.5%		-50.6%
Adjustments:
Transaction costs	536,245		1,112,234		536,245		1,112,234
Reorganization costs	1,000,000		-		1,000,000		-
Earn-out	2,100,000		-		2,100,000		-
Increase in value of Puttable Class A and Class 1 Special shares			8,509,940		0		27,117,000
Adjusted EBITDA	5,488,405		3,902,854		8,715,025		6,180,552
Adjusted EBITDA Margin	12.4%		16.4%		11.1%		14.2%
Other adjustments:
Pre-acquisition EBITDA for 3 acquistions completed in 2018	-		2,877,430		-		4,891,786
Pro-forma Adjusted EBITDA	5,488,405		6,780,284		$8,715,025		$11,072,338
Pro-forma Adjusted EBITDA Margin	12.4%		17.4%		11.1%		15.8%

SOURCE Spark Power Group Inc.

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