Lumenpulse Reports Fiscal 2016 Q3 Results

MONTREAL, QUEBEC--(Marketwired - March 10, 2016) -

• Total revenues of $35.5 million for Q3 Fiscal 2016, an increase of 39% over the same period last year
• Strong U.S. revenue growth, up 88% in Q3 Fiscal 2016 over Q3 Fiscal 2015
• Solid Q3 Adjusted Consolidated Gross Margin at 50.3%, a 6.7 percentage point increase over the same period last year
• Q3 Adjusted EBITDA increased to $3.6 million, or 10.1% of revenues, an improvement of 4.8 percentage points compared to the preceding year
• Q3 Adjusted Net Income increased to $4.1 million compared to $2.1 million for the same period last year
• Q3 Adjusted diluted EPS of $0.16 compared to $0.08 for the same period last year
• Q3 operating cash flow of $3.8 million
• Acquisition of Fluxwerx Illumination Inc., a fast growing pure-play specification-grade LED lighting solutions provider, for a total initial consideration of $60 million
• New revolving credit facility of $40 million to finance expanding operations

Lumenpulse Inc. (TSX:LMP), a leading manufacturer of high performance, specification-grade LED lighting solutions, released today its financial results for the third quarter and nine-month period ended January 31, 2016.

"Our results for the third quarter were spearheaded by the impressive performance of our U.S. operations, which grew 88%, well above the industry growth rate, reflecting the traction of our innovative and expanding product portfolio and the strength of our distribution channels," said François-Xavier Souvay, President and CEO of Lumenpulse.

"Q3 Adjusted Lumenpulse Products Gross Margin attained 50.8%, up from 45.2% over the same period last year due to the continued leverage of our manufacturing capabilities and productivity initiatives. Adjusted EBITDA for the quarter was $3.6 million or 10.1% of total revenues representing a notable improvement over the $1.4 million or 5.3% reported for the same period last year.

"In recent months, we were active on the M&A front with the acquisition of Exenia s.r.l. based in Italy, which adds complementary LED products in the retail, hospitality and museum sectors. This acquisition also allows us to access a well-established network of 14 Italian agents and 13 European VARs, which in turn should increase the penetration of our brands in Italy and the rest of Europe.

"Today, in a separate press release, we announced the acquisition of Fluxwerx for an initial consideration of $60 million, which could reach $85 million based on an earn-out payment, which is subject to certain conditions. The merging of our organizations represents a major milestone, which we believe will be transformational for the Lumenpulse Group, creating one of the most exciting and innovative companies in the LED lighting industry.

"Over the next few quarters, we look forward to the integration of our recent acquisitions as we see tremendous cross-selling and technology synergies, new opportunities via a larger addressable market, expanded geographic access and the benefit of new management sharing our vision and goals," added Mr. Souvay.

"We remain in a solid financial position which allows us to continue the execution of our growth strategy. We had $41.3 million in cash and cash equivalents at quarter-end, of which a substantial portion was used to acquire Fluxwerx. Recently we entered into a new revolving credit agreement of up to $40 million allowing us to maintain our operational flexibility," added Peter Timotheatos, Executive Vice-President and Chief Financial Officer.

"Our objectives remain to continue growing Lumenpulse's business at a rate that exceeds the growth rate in the general lighting market for LED products, and, within the next four years, to converge towards market growth, to maintain an Adjusted Gross Margin of approximately 50% and ultimately to deliver Adjusted EBITDA margins of approximately 18% to 20%," concluded Mr. Souvay.

Financial Highlights

(Unaudited, in millions of Canadian dollars, except per share amounts)

For the third quarters and the nine-month periods ended January 31, 2016 and 2015
		Q3 2016		Q3 2015		Change		YTD 2016		YTD 2015		Change
Revenues - Consolidated		35.5		25.5		10.0		104.8		69.7		35.1
	Growth	39	%					50	%
Revenues - Lumenpulse products (LP)		33.9		22.7		11.2		98.2		60.1		38.1
	Growth	50	%					63	%
Adjusted Gross Profit % - Consolidated1		50	%	44	%	6 pts		49	%	43	%	6 pts
	Gross Profit % - Consolidated	49	%	43	%	6 pts		48	%	43	%	0 pts
Adjusted Gross Profit % - LP1		51	%	45	%	6 pts		50	%	45	%	5 pts
	Gross Profit % - LP	49	%	45	%	4 pts		49	%	44	%	5 pts
Adjusted EBITDA1		3.6		1.4		2.2		9.8		1.7		8.1
	EBITDA1	1.6		1.1		0.5		6.4		0.3		6.1
Adjusted Net Income1		4.1		2.1		2.0		9.8		1.6		8.2
	Net Income (Loss)	1.6		1.6		-		5.6		(0.3	)	5.9
Adjusted EPS (Loss per Share) - Diluted1,2		0.16		0.08		0.08		0.39		0.06		0.33
	EPS (Loss per Share) - Diluted2	0.06		0.06		-		0.22		(0.01	)	0.23

1

See the Non-IFRS financial measures section below.

2

The calculations for the third quarter and the nine-month period ended January 31, 2016 include the effect of 1,246,331 and 1,308,637 stock options, respectively, which are deemed to be dilutive. In the periods where the Company incurred net losses, all potentially dilutive stock options have been excluded from the calculation of diluted loss per share. All outstanding share options could potentially dilute earnings per share in the future.

Revenues

For the third quarter of Fiscal 2016, revenues increased by $10.0 million, or 39%, to $35.5 million compared to $25.5 million for the corresponding period last year. The increase was driven by the revenue growth of the Lumenpulse Products segment partially offset by the decrease in OMP revenues. Lumenpulse Products achieved significant year-over-year growth of 50% with revenues of $33.9 million from $22.7 million for the same period last year. For the nine-month period, Lumenpulse recorded revenues of $104.8 million, a 50% increase compared to revenues of $69.7 million for the same period last year.

The Lumenpulse Products revenue growth was fueled by a strong performance in the U.S. with year-over-year quarterly growth of 88% and a nine month year-to-date growth of 95%. For both periods, the increase was primarily due to the leveraging of our existing product lines and further penetration of our existing network of agents and VARs in North America, the expansion of our addressable market coverage and a favorable foreign exchange impact.

International revenues decreased slightly to $9.2 million compared to $9.5 million for the same period last year. Revenues in the third quarter included a favorable foreign exchange impact and the benefit of the recently acquired Exenia. However, these were offset by a lower-than-expected performance in this segment driven in part by the economic slowdown experienced in certain geographical areas during the past few months and the usual seasonality experienced during the third quarter.

Adjusted Gross Margin¹

For the third quarter and nine-month period ended January 31, 2016, Adjusted Consolidated Gross Margin increased to 50.3% from 43.6% and to 49.1% from 43.3% respectively. For both periods, the increases were primarily related to the greater proportion of Lumenpulse Products, which generated a higher and improved gross margin.

For the third quarter and the nine-month ended January 31, 2016, Adjusted Gross Margin on Lumenpulse Products increased to 50.8% from 45.2% and to 50.1% from 44.9%, respectively. The variance is primarily due to a favorable geographical mix, manufacturing efficiencies and greater production capacity utilization.

Adjusted EBITDA¹

For the third quarter of Fiscal 2016, Adjusted EBITDA increased to $3.6 million from $1.4 million for the same period last year. For the nine-month period ended January 31, 2016, Adjusted EBITDA increased to $9.8 million from $1.7 million a year ago. For both periods, the increases were mainly attributable to significant increases in Adjusted Gross Profit, partially offset by the higher level of operating expenses required to support growth.

Adjusted Net Income¹

For the third quarter of Fiscal 2016, Adjusted Net Income increased to $4.1 million, or $0.16 per diluted share, from $2.1 million, or $0.08 per diluted share, for the corresponding period last year. Adjusted Net Income for the nine-month period increased to $9.8 million, or $0.39 per diluted share, from $1.6 million, or $0.06 per share a year ago. These favorable variances were mostly due to the improvement on Adjusted EBITDA and a foreign exchange gain included in the net financing costs, partially offset by higher depreciation and amortization.

Financial Position

The Company's financial position remains solid. With cash flow from operations of $3.8 million in the third quarter, driven mainly by profitability, the Company's cash and cash equivalents stood at $41.3 million as of January 31, 2016. Subsequent to quarter end, on March 9, 2016, a substantial amount was used to fund the acquisition of Fluxwerx. The Company also cancelled its previous revolving credit Facility and entered into a new revolving credit facility of up to $40.0 million.

Acquisition of Fluxwerx Illumination

The Company also announced today that it has acquired Fluxwerx Illumination Inc., a privately owned, fast growing, pure-play specification-grade LED lighting solutions provider based in British Columbia, Canada, for a total initial consideration of $60 million.

Fluxwerx is a manufacturer of innovative, high-performance, LED luminaires for the general lighting of commercial and institutional spaces, such as office, education and healthcare. Founded in 2011, Fluxwerx has quickly established itself at the forefront of LED lighting solution providers, with a distinctive product offering and innovative proprietary anidolic optics technology.

The initial consideration paid by Lumenpulse consists of an upfront cash payment of $36 million, the issuance of Lumenpulse shares for an aggregate amount of $20 million (based on a price of $15.78 per share) and a cash holdback of $4 million to be paid approximately one year after closing. The upfront cash payment was financed with available liquidities.

The transaction is subject to post-closing adjustments and to an earn-out payment of up to $25 million, payable in cash or shares at the option of Lumenpulse, based on a linear formula which combines revenue and Adjusted EBITDA targets for Fiscal 2017. The revenue component of the earn-out payment is based on a range between $43.8 million and $55 million, subject to the achievement of a minimum Adjusted EBITDA performance.

Conference Call

Lumenpulse has scheduled a conference call to discuss these results on Thursday, March 10, 2016, beginning at 11:00 A.M. (ET). This conference call will be broadcast live on the Internet at the following link: Q3 2016 Earnings Conference Call. A slideshow presentation intended for real-time viewing with the conference call will also be available. Alternatively, investors may join by dialing in North America: 1-844-825-4409 (conference ID: 45117499). The webcast will be archived at www.lumenpulse.com/en/investors/quarterly-results.

Non-IFRS Measures

This MD&A makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective.

The non-IFRS measures permit assessment of the results generated by the Company's core business, prior to consideration of how the activities are financed, how the results are taxed or the non-cash impact associated to the volatility of the Company's share price. Unusual or other items of a non-recurring nature, that could make the period-over-period comparison of the Company's underlying business less meaningful or not representative of future performance, are further excluded from Adjusted Non-IFRS measures. Although amortization of acquired intangible assets, expense for share-based compensation and expense for unrealized gains or losses on revalued cash share-based compensation have been recognized in prior periods and could reoccur in future periods, management excludes these charges during internal reviews of performance, operational analysis, decision making, and other activities. These measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. Management's definition of these measures may differ from similarly titled measures reported by other companies.

We use non-IFRS measures including EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Gross Profit, Adjusted Earnings (Loss) per share-basic and diluted to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.

EBITDA is defined as earnings before net financing (income) costs, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA less unusual and non-recurring items, non-cash share-based compensation and unrealized gains or losses on revalued cash share-based compensation. Unusual and non-recurring items is defined as expenses incurred for the initial public offering ("IPO"), acquisition-related costs and employee termination costs associated with an operational restructuring. Unrealized gains or losses on revalued cash share-based compensation which has been expensed and is unexercised at the end of the reporting period. These unrealized gains or losses are driven by the fluctuation of the Company's common share price during the reference period.

Adjusted Net Income (Loss) is defined as net income (loss) before net change in carrying value of the redeemable shares at the option of the holders and related financial derivative liability, early repayment fee on long-term debt, unusual and non-recurring items net of taxes, unusual and non-recurring tax recoveries, non-cash share-based compensation, unrealized gains or losses on revalued cash share-based compensation and amortization of acquired intangible assets. Unusual and non-recurring tax recoveries is defined as income tax recoveries resulting from estimated values of acquired assets and liabilities.

Adjusted Gross Profit is defined as gross profit less non-cash share-based compensation, unusual and non-recurring items, unrealized gains or losses on revalued cash share-based compensation and depreciation and amortization.

Adjusted Earnings per share - diluted is defined as the Adjusted Net Income on the weighted average number of ordinary shares outstanding during the period and all potentially dilutive stock options.

Adjusted Loss per share - diluted is defined as the Adjusted Net Loss on the weighted average number of ordinary shares outstanding during the period. In the periods where the Company incurred net losses, all potentially dilutive stock options have been excluded from the calculation of diluted loss per share. All outstanding share options could potentially dilute earnings per share in the future.

For a reconciliation of net income (loss) to EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss), a reconciliation of gross profit to Adjusted Gross Profit,, see section 2.2.1 "Reconciliation of Non-IFRS Measures" in the Company's Management's Discussion & Analysis for the Third Quarter Fiscal 2016 filed with the Canadian securities regulatory authorities, which is available on the SEDAR website at www.sedar.com.

Forward-Looking Information

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Such forward-looking information includes, but is not limited to, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. This forward-looking information is identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", or "continue", the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking information contains these terms and phrases. Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the risk factors identified in the Company's annual information form filed with the Canadian securities regulatory authorities, which is available on the SEDAR website at www.sedar.com. There can be no assurance that such information will prove to be accurate, and readers are cautioned not to place undue reliance on this forward-looking information. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Company's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to help investors measure progress towards management's objectives and the reader is cautioned that such statements may not be appropriate for other purposes. Unless otherwise noted, the forward-looking information contained herein is provided as of the date hereof, and we do not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.

To obtain the complete unaudited interim condensed consolidated financial statements, the Management's Discussion & Analysis and additional information about the Company, including our 2015 Annual Information Form, please consult our website at www.lumenpulse.com and on the SEDAR website at www.sedar.com.

About Lumenpulse Inc.

Founded in 2006, Lumenpulse designs, develops, manufactures and sells a wide range of high performance and sustainable specification-grade LED lighting solutions for commercial, institutional and urban environments. Lumenpulse is a leading pure-play specification-grade LED lighting solutions provider and has earned many awards and recognitions, including several Product Innovation Awards (PIA), three Next Generation Luminaires Design Awards, a Red Dot Product Design Award and a Lightfair Innovation Award. Including Fluxwerx's 70 employees, Lumenpulse now has more than 584 employees worldwide, with corporate headquarters in Montreal, Canada, and offices in Vancouver, Québec City, Boston, Paris, Florence, London and Manchester. Lumenpulse is listed on the Toronto Stock Exchange under the symbol LMP.

(1) Please refer to the table in the Financial Highlights above for IFRS measures and to the Non-IFRS measures section at the end of this press release.