VICTORIA, BC, CANADA Carmanah Technologies Corporation (TSX: CMH) (“the Company” or “Carmanah”) today reported its first quarter 2019 financial results for the period ended March 31, 2019. Currency amounts are in U.S. dollars unless otherwise noted.
All figures below, unless otherwise stated, are for Carmanah’s continuing operations and exclude the operating results from the Company’s discontinued operations, which include the divestiture of Carmanah’s Marine, Airfield Ground Lighting and Aviation Obstruction Lighting divisions to SPX Corporation on February 1, 2019 (the “SPX Divestiture”).
First Quarter Revenues and Profitability
In the first quarter of 2019, we generated revenues of $7.8 million.
- Signals generated revenues of $3.3 million, up $1.0 million or 39.4%, driven by increased sales in our Telematics vertical (up $0.1 million) and our Traffic vertical (up $0.8 million). The Traffic increase is due to our acquisition of IDC in October 2018 as well as strong sales made possible by the patent acquired in March 2018.
- Offshore generated revenues of $2.9 million, down $1.2 million or 29.2%, due to project delays that are expected to shift revenues into future periods.
- Illumination generated revenues of $1.7 million, up $0.3 million or 19.0%. The increase was due to the full shipment of a large order in the first quarter of 2019, resulting in additional revenue being recognized compared to prior year.
Gross margin percentage in the first quarter of 2019 was 38.4%, up from 36.5% in the same period in 2018.
Core operating expenditures1 (a non-IFRS financial measure) in the first quarter of 2019 were $3.2 million, up from $2.9 million or 8.7% over the same period in 2018, primarily due to an increase in development costs.
Net loss in the first quarter of 2019 was $0.6 million, up from net loss of $0.1 million in the same period in 2018. The increase in net loss is primarily due to an increase of $0.5 million in foreign exchange losses incurred during the period.
Carmanah’s management relies on adjusted EBITDA2 (a non-IFRS financial measure) to gauge financial performance. In the first quarter of 2019, adjusted EBITDA was $0.4 million or 5.3% of revenue, an improvement from $0.3 million or 3.9% of revenue in the same period in 2018. A table reconciling net income and adjusted EBITDA is included in this release.
“During the first quarter, we prepared for, and then successfully closed, the sale of our Marine, Aviation and Obstruction lighting businesses to SPX Corporation. The entire process was well planned and executed.” said John Simmons, Chief Executive Officer. “At the same time, and despite distractions arising from the transaction, our continuing operations performed well and within our expectations.”
Highlights for the quarter are provided below:
| Three months ended March 31, | ||
| (US$ thousands) | 2019 | 2018 |
| Revenue | 7,852 | 7,860 |
| Gross margin % | 38.4% | 36.5% |
| Core operating expenditures | 3,210 | 2,953 |
| Net (loss)/income | (513) | (88) |
| Adjusted EBITDA1 | 415 | 309 |
Financial Condition at March 31, 2019 compared to December 31, 2018
- Cash and cash equivalents of $88.0 million, up $77.2 million from $10.8 million.
- Working capital of $89.6 million, up $46.4 million from $42.9 million.
Complete set of Financial Statements and Management Discussion & Analysis
A complete set of Financial Statements and Management’s Discussion & Analysis (“MD&A”) for the first quarter ended March 31, 2019 are available on Carmanah’s corporate website. To view these documents, visit: https://carmanah.com/company/financial-reports. Both documents are also filed on SEDAR at www.sedar.com. The financial information included in this release is qualified in its entirety and should be read together with the audited consolidated financial statements for the year ended December 31, 2018, including the notes thereto.
EBITDA and Adjusted EBITDA
| EBITDA reconciliations | Three months ended March 31, | |
| (US$ in thousands) | 2019 | 2018 |
| Net income/(loss) | (513) | (88) |
| Add/(deduct): | ||
| Interest | (173) | 61 |
| Income tax recovery | (120) | (3) |
| Amortization | 414 | 241 |
| Non-cash stock-based compensation | 60 | 119 |
| EBITDA | (329) | 330 |
| Merger and acquisition costs | 200 | – |
| Extraordinary legal costs | 1 | 43 |
| Other non-recurring expenses/(recoveries) | – | (55) |
| Foreign exchange (gain)/loss | 543 | (9) |
| Adjusted EBITDA | 415 | 309 |
1 NON-IFRS FINANCIAL MEASURES: Core operating expenditures. This news release presents information about core operating expenditures, which is a non-IFRS financial measure, as a supplementary indicator of operating performance. Carmanah defines core operating expenditures as operating expenditures excluding anomalies, such as the recognition of previously unrecognized investment tax credits or restructuring charges. Carmanah uses this non-IFRS measure internally to make strategic decisions, forecast future results and evaluate its performance. Additionally, Carmanah uses this non-IFRS measure to assess current and future operating results and to make investment decisions. Core operating expenditures is not intended as a substitute for IFRS measures. A limitation of utilizing this non-IFRS measure is that the IFRS accounting effects of the non-recurring items do in fact reflect the underlying financial results of Carmanah’s business and these effects should not be ignored in evaluating and analyzing Carmanah’s financial results. Therefore, management believes that Carmanah’s IFRS measures of net loss and the same respective non-IFRS measure should be considered together. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Readers should refer to the “Non-IFRS Financial Measures” section of the Company’s most recently filed MD&A for the three and twelve months ended December 31, 2018 for a more detailed discussion of these measures and their calculation.
2 NON-IFRS FINANCIAL MEASURES: EBITDA and Adjusted EBITDA. This news release presents information about EBITDA and adjusted EBITDA, both of which are non-IFRS financial measures, to provide supplementary information about 2018 operating performance. Carmanah defines EBITDA as net income or loss before interest, income taxes, amortization, and non-cash stock-based compensation. Adjusted EBITDA removes unusual or non-operating items from EBITDA, such merger and acquisition costs, restructuring charges, asset write offs, and foreign exchange gains and losses. Carmanah uses these non-IFRS measures internally to make strategic decisions, forecast future results and evaluate its performance. EBITDA and adjusted EBITDA are not intended as a substitute for IFRS measures. A limitation of utilizing these non-IFRS measures is that the IFRS accounting effects of the non-recurring items do in fact reflect the underlying financial results of Carmanah’s business and these effects should not be ignored in evaluating and analyzing Carmanah’s financial results. Therefore, management believes that Carmanah’s IFRS measures of net loss and the same respective non-IFRS measure should be considered together. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Readers should refer to the “Non-IFRS Financial Measures” section of the Company’s most recently filed MD&A for the three and twelve months ended December 31, 2018 for a more detailed discussion of these measures and their calculation.
About Carmanah Technologies Corporation
Carmanah designs, develops and distributes a portfolio of products focused on energy optimized LED solutions for infrastructure. Since 1996, we have earned a global reputation for delivering durable, dependable, efficient and cost-effective solutions for industrial applications that perform in some of the world’s harshest environments. We manage our business within three reportable segments: Signals, Illumination and Offshore. The Signals segment serves the Traffic and Telematics markets. The Illumination segment provides solar powered LED outdoor street lights for municipal and commercial customers, while the Offshore segment specializes in the provision of comprehensive safety and marking systems for offshore wind farms.
Contact
Carmanah Technologies Corporation:
Evan Brown, (250) 380-0052
Chief Financial Officer/Corporate Secretary
investors@carmanah.com
This release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “estimates”, “expect”, “could”, or variations of such words and phrases. Forward-looking statements or information in this news release relate to, among other things: revenues, revenue growth; gross margins and estimates of EBITDA and adjusted EBITDA; and estimates of core operating expenditures. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Carmanah to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to: our ability to develop products and technologies that keep pace with the continuing changes in technology, evolving industry standards, new product introductions by competitors and changes in client preferences and requirements; our ability to find a suitable and appropriate investment for the use of proceeds from the SPX Divestiture; and our ability to achieve future profitability upon a potential restructuring or reorganization of Carmanah’s business. These forward-looking statements are based on management’s current expectations and beliefs but given the uncertainties, assumptions and risks, readers are cautioned not to place undue reliance on such forward-looking statements or information. Carmanah disclaims any obligation to update, or to publicly announce, any such statements, events or developments except as required by law.
For additional information on these risks and uncertainties, see Carmanah’s most recently filed Annual Information Form (“AIF”) and annual MD&A, which are available on SEDAR at www.sedar.com and on the Company’s website at www.carmanah.com. The risk factors identified in Carmanah’s AIF and MD&A are not intended to represent a complete list of factors that could affect Carmanah.