December 07, 2011 07:00 ET

H2O Innovation Reports Fiscal 2012 First Quarter Results: Sales and EBITDA Up, Net Loss Significantly Down, Backlog Remains High

QUEBEC CITY, QUEBEC--(Marketwire - Dec. 7, 2011) - H2O Innovation Inc. (TSX VENTURE:HEO)(ALTERNEXT:MNEMO:ALHEO)

  • Revenues of $7.1 million, up from $6.3 million for the same period in fiscal 2011.

  • Gross profit at 24.7%, compared to 29.8% for the same period in fiscal 2011.

  • Operating loss of ($39,597), compared to operating loss of ($373,941) for the same period in fiscal 2011.

  • EBITDA at $239,387, compared to ($87,863) for the same period in fiscal 2011.

  • Adjusted EBITDA at $291,975, compared to ($62,099) for the same period in fiscal 2011.

  • Net loss of ($88,216), compared to ($629,610) for the same period in fiscal 2011.

  • Operating activities generated $1,083,938 in cash, compared to ($2,559,720) of cash used for the same period in fiscal 2011.

All amounts in Canadian dollars unless otherwise stated.

H2O Innovation Inc. ("H2O Innovation" or the "Company"), a complete water treatment solutions company providing integrated technological water treatment solutions to municipal, energy & mining end-users, announces today its results for the first quarter of fiscal year 2012. This is the Company's first set of consolidated financial statements prepared under International Financial Reporting Standards ("IFRS"). During the quarter ended September 30, 2011, the Company's revenues increased by nearly 12% to $7.1 M, up from $6.3 M in the comparable quarter of the previous fiscal year, and its backlog of sales of water treatment systems remained high at $31.6 M. The Company recorded an adjusted EBITDA of $291,975 during the quarter, compared to ($62,099) in the first quarter of the previous fiscal year. Operating activities generated $1,083,938 in cash, compared to ($2,559,720) of cash used for the same period in fiscal 2011.

"We have started this new fiscal year with a stronger position than ever in our eleven-year history. With our backlog remaining very high at $31.6 M, a sound revenue mix between systems sales and consumables sales, a streamlined cost structure and a clear focus on the three key markets of energy, mining and municipal, we are confident that fiscal 2012 will be for H2O Innovation a year of growth and positive EBITDA, with improving results quarter-after-quarter, as they have started to do in the last quarters. Over the last twelve months, we have generated $0.5 M in EBITDA, compared to ($2.8 M) for the previous twelve months period, a significant progress we expect to accelerate as projects from our backlog enter the high-revenue generating phases of manufacturing and assembly", stated Frédéric Dugré, President and CEO of H2O Innovation Inc.

Three-month period ended September 30
2011 2010
Revenues 7,069,768 6,325,081
Gross profit 24.7 % 29.8 %
Gross profit 1,744,687 1,884,867
Operating loss (39,597 ) (373,941 )
EBITDA (1) 239,387 (87,863 )
Adjusted EBITDA (excluding stock-based compensation) 291,975 (62,099 )
Net loss for the period (88,216 ) (629,610 )
Basic and diluted net loss per share (0.001 ) (0.010 )
Cash generated by (used in) operating activities 1,083,938 (2,559,720 )

(1) Earnings before interests, taxes, depreciation and amortization (EBITDA) is a performance indicator that is not determined in accordance with International Financial Reporting Standards nor Canadian generally accepted accounting principles and is not intended as an alternative measure of net earnings. Because EBITDA may not be calculated identically by all companies, the Company's result may not be directly comparable to similarly titled measures of other companies.

Total revenues for the quarter increased to $7.1 M, from $6.3 M in the first quarter of fiscal 2011, showing a nearly 12% increase. When compared to the previous quarter (Q4 fiscal 2011), total revenues slightly decreased, mainly due to the somewhat seasonal nature of the Company's sales of specialty chemicals and consumables, which have a historical tendency to slow down during the summer period. Sales of specialized supplies for the maple syrup production industry are also at a low point during first quarters, as production season ends and producers have yet to place orders for the next season.

At $4.3 M, revenues generated by the sales of water treatment systems during the first quarter of this new fiscal year show a 23% increase compared to the corresponding quarter of the previous fiscal year, but a slight 4% decrease compared to Q4 fiscal 2011. This slight short-term decrease partly originates from the stage of completion of the new projects awarded late in fiscal 2011, projects that are still mostly in the design and engineering phases and have yet to enter the high-revenue generating phases of manufacturing and assembly. With project completion advancing, these phases should be reached progressively in the next quarters of the fiscal year, according to Management's knowledge and control on project evolution.

This quarter's bookings totalled an unusually low level of $0.9 M, compared to $3.5 M for the corresponding quarter last year. This contraction in new bookings secured in this first quarter of fiscal 2012 is partly due to the long and somewhat lumpy sales cycle of systems and equipment, as illustrated by the record-high bookings secured in the fourth quarter of fiscal 2011 and this quarter's unusually low level of bookings. Management believes that such effects will be somewhat dampened in the following quarters of fiscal 2012 as the Company's sales efforts in the mining, energy and Canadian municipal markets bear fruits, counterbalancing the soft demand from the U.S. municipal sector due to the state of the U.S. economy.

On a trailing twelve-months basis, comparing the October 1 to September 30 periods ended in 2010 and 2011, bookings positively progressed from $20.4 M to $33.5 M, showing a year-long trend of backlog growth that Management expects to continue in the next quarters.

During this first quarter of fiscal 2012, revenues from sales of specialty chemicals and consumables reached the same level as in the previous fiscal year, at $2.8 M. During the quarter, the Company added four new international distributors for its Professional Water Technologies brand of specialized chemicals for membrane systems.

Revenue composition constitutes a strategic factor that has a direct impact on gross profit, revenue volatility and corporate growth. With revenues from specialty chemicals and consumables representing a lower proportion of the quarter's total revenues compared to the first quarter of fiscal 2011, the quarter's gross profit was directly impacted and declined compared to the corresponding quarter of the previous year. Revenues from systems and equipment projects recorded during the quarter came mostly from projects in the planning and engineering phases, where invoicing and revenue recognition are lower than during the manufacturing and assembly phases.

During the quarter, the Company proceeded with a reallocation of resources to ensure production of the projects in its backlog. This reallocation has reduced by 2.7 percentage points the gross profit margin by increasing costs of goods sold and reducing operating expenses. This new allocation of resources is the result of sound management analysis in regards of project execution.

Loss from operations for the quarter was ($39,597), compared to ($373,941) for the same period of the previous fiscal year. Operating, selling and administrative expenses were collectively down 7% or $143,816 in the quarter, compared to the first quarter of fiscal 2011 - a result of the cost reduction program induced last year and of the reallocation of resources.

EBITDA for the quarter was $239,387, compared to ($87,863) for the same period ended September 30, 2010. Adjusted EBITDA (excluding a ($52,588) stock-based compensation expense) for the quarter was $291,975, compared to ($62,099) in the same period of fiscal 2011. On a trailing twelve-months basis, comparing the October 1st to September 30 periods ended in 2010 and 2011, EBITDA progressed from ($2,836,050) to $477,296.

During the quarter, the Company recorded a net loss of ($88,216) or ($0.001 per share), compared to ($629,610) or ($0.010 per share) for the first quarter of fiscal 2011.

"As we advance in our twelfth year of operations, we will continue to pay close attention to project execution and cost control, now more important than ever as the major projects from our record-high backlog enter the critical phase of production. The new additions to our sales teams completed early in this quarter will help drive sales growth of both our business sectors over the course of the year. Looking further ahead, as new opportunities present themselves, we continue to look for new international partnerships or strategic alliances that could have strategic or tactical fit with our business model and geographical footprint", concluded Frédéric Dugré.

H2O Innovation moves into new headquarters - stays based in Quebec City's vibrant creative downtown
On December 15, 2011, H2O Innovation will move its headquarters and Quebec's sales & engineering offices into a new, refreshing and energizing location located at 330 rue St-Vallier Est, Suite 340, Quebec City. Moving only two blocks from its previous location, H2O Innovation has elected to keep its headquarters in the heart of Quebec City's downtown, where creative neighbors include state universities and natural resources research centers, multimedia, video game, social and traditional media companies. H2O Innovation's new main offices will feature open workspaces combining process engineers, project managers and project finance specialists in a project-oriented environment featuring abundant natural light and ergonomic individual workspace layout.

Annual General Meeting of Shareholders

H2O Innovation will hold its Annual General Meeting of Shareholders today Wednesday, December 7, 2011, at 10 a.m. (Eastern Time) at Le Cercle, 228 rue St-Joseph Est, Quebec City (Quebec), Canada.

Philippe Gervais, Chairman of the Board, and Frédéric Dugré, President and Chief Executive Officer, are pleased to invite shareholders and all other interested parties to attend the meeting, during which they will review the results of fiscal 2011, comment the results of the first quarter of fiscal 2012 and provide an update on the Company's long term growth strategy.


For those unable to attend in person, a live webcast of the meeting and Management presentation (audio and slides) will be available through the Company's website at www.h2oinnovation.com. The webcast will remain available for replay for 90 days on the Company's website in the Investors section.

Conference call

H2O Innovation will also hold a conference call at 1:00 p.m. (Eastern Time) to take questions on the first quarter results from shareholders, analysts and institutional investors. As it will follow by a few hours the Annual General Meeting of Shareholders, the call will not repeat Management presentation and will start directly with the question-and-answer session.

Shareholders, analysts and institutional investors are invited to participate. The numbers to dial for access are 514-392-9193 (Montreal area) or the North American toll-free number 1-866-226-1792. International participants are invited to dial +1 514-392-9193.

Media representatives and other interested parties may participate in listen only mode or may listen to the live webcast of the conference call (audio and slides) accessible through H2O Innovation's website at www.h2oinnovation.com. The webcast will also remain available for replay on the Company's website.

The first quarter financial report is available on the Company's website (www.h2oinnovation.com) and on NYSE Euronext Alternext's site (www.alternext.fr). Additional information on the Company is also available on SEDAR (www.sedar.com).

Prospective disclosures

Certain statements set forth in this press release regarding the operations and the activities of H2O Innovation as well as other communications by the Company to the public that describe more generally management objectives, projections, estimates, expectations or forecasts may constitute forward-looking statements within the meaning of securities legislation. Forward-looking statements concern analysis and other information based on forecast future results and the estimate of amounts that cannot yet be yet determined. Forward-looking statements include the use of the words "expect", "believe", "estimate" and other similar terms as well as those usually used in the future and the conditional, notably regarding certain assumptions as to the success of a venture. Those forward-looking statements involve a number of risks and uncertainties, which may result in actual and future results of the Company to be materially different than those indicated. Information about the risk factors to which the Company is exposed is provided in the Annual Information Form dated September 28, 2011 available on SEDAR (www.sedar.com). Unless required to do so pursuant to applicable securities legislation, H2O Innovation assumes no obligation to update or revise forward-looking statements contained in this press release or in other communications as a result of new information, future events and other changes.

About H2O Innovation

Building on 11 years of experience, H2O Innovation provides integrated technological water treatment solutions based on membrane filtration technology to municipal, energy & mining end-users. H2O Innovation designs state-of-the-art custom-built water treatment systems for the production of drinking water and industrial process water, the reclamation and reuse of water, and the treatment of wastewater, while providing a complete line of specialty chemicals and consumables for membrane filtration and reverse osmosis systems. With more than 100 employees and seven locations in North America, H2O Innovation is also a founding partner of H2O Innovation India, a joint venture based in Mumbai, India. Shares of H2O Innovation are listed on the TSX Venture Exchange (HEO) and the NYSE Euronext Alternext Exchange (MNEMO:ALHEO). For more, visit www.h2oinnovation.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the Alternext Exchange accepts responsibility for the adequacy or accuracy of this release.

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