Lumenpulse Group Reports Record Second Quarter Fiscal 2017 Results

  • Record consolidated revenues of $56.3 million for Q2 Fiscal 2017; up 51% over Q2 Fiscal 2016
  • Solid Q2 gross margin at 48.7% and Adjusted Gross Margin1 at 49.5%
  • Q2 Operating income at $3.2 million, up from operating income of $2.7 million
  • Record Q2 Adjusted EBITDA1 of $6.7 million, or 12.0% of revenues, up 0.8 points versus previous year
  • Q2 diluted EPS of $0.08 and Adjusted diluted EPS1 of $0.17
  • Q2 Fiscal 2017 net cash flows from operating activities of $5.3 million

Montreal, Quebec, December 8, 2016 – Lumenpulse Inc. (TSX: LMP), the parent company of the Lumenpulse Group, a leading manufacturer of high performance, specification-grade LED lighting solutions, released today its second quarter of Fiscal 2017 results for the period ended October 31, 2016.

We are very pleased with our second quarter results which represent a milestone in financial performance for our business. Our year-over-year revenue performance highlights the strength of our combined product portfolio strategy. Together our product portfolios, including our acquired product portfolios, generated significant year-over-year growth underscoring the breadth of lighting applications we now cover,” said Francois-Xavier Souvay, President and CEO of the Lumenpulse Group.

“Our North American sales teams, which now have access to four of our five brands including Fluxwerx, delivered solid revenue growth. Outside North America, our growth was tempered by the financial underperformance in the U.K. At this time, the financial performance of our experienced UK sales team does not truthfully reflect the performance of this team in building our presence, developing pipeline of specified projects, and the key role they play in developing various project specifications that originate in the UK but are delivered elsewhere in the world. We have noticed that new UK based specifications are taking a longer time to convert. While economic uncertainty in the UK persists, we remain cautiously optimistic about our future prospects in the region. Other regions are performing in line with expectations.

“We continue to execute on our product road map. During the second quarter, we successfully introduced the new Lumenalpha collection, which adds 30 new luminaires for commercial, retail, institutional and hospitality markets. We also launched the latest generation of the Lumencove Nano and new optics for Lumenline. Furthermore, we are realizing synergies across our portfolios, with orders that include several brands for the same project.

“We are pleased with our Adjusted EBITDA margin performance of 12.0% for this quarter. Our Adjusted EBITDA performance demonstrates the operating leverage we are working to deliver for this fiscal year. As we have consistently said, quarterly performance is not necessarily an indicator of annual performance however, Q2 Fiscal 2017 is a strong indicator of the expected future financial performance of our business. We remain focused on delivering our full fiscal year targets as quarterly results always remain subject to short-term variability. We continue to grow our pipeline and backlog and remain focused on execution to achieve our Fiscal 2017 guidance. At this time, we are reaffirming our long-term guidance for revenues and Adjusted EBITDA and our Fiscal 2017 Financial Outlook," concluded Mr. Souvay.

Financial Highlights[1],[2]

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

Revenues
For its second quarter ended October 31, 2016, Lumenpulse’s revenues increased by $18.9 million, or 51%, to $56.3 million compared to $37.4 million for the corresponding period last year. The 51% increase reflects Acquisition Growth[1] of 29%, Organic Growth[2] of 24% reflecting year-over-year revenue growth across all product portfolios, including acquired product portfolios, which were offset by negligible foreign exchange impact of 2%.

For the second quarter ended October 31, 2016, revenues in Canada increased by 61% to $11.3 million, of which 45% was driven by Organic Growth when compared to the same period last year. The revenues for the quarter include the delivery of a significant project previously delayed in the first quarter of Fiscal 2017. Revenues in the United States increased by 57% to $35.1 million, of which 29% was driven by Organic Growth. Revenues outside North America increased by 24% to $9.9 million. This growth rate takes into account the financial under performance of the UK region as the sales team continues to build the pipeline of specified projects.

For the six-month period ended October 31, 2016, consolidated revenues increased by 47% to $101.6 million from $69.3 million compared to the same period last year.

Gross margin and Adjusted Gross Margin
For the second quarter ended October 31, 2016, gross margin decreased slightly to 48.7% from 49.0% the preceding year, driven primarily by the lower gross margin of our acquired product portfolios. For the six month period ended October 31, 2016, our gross margin increased to 48.2% from 47.8%, primarily due to a favorable product mix combined with manufacturing efficiencies which were partly offset by lower margin contribution of Fiscal 2016 Acquisitions and an unfavourable foreign exchange impact.

For the second quarter and the six-month period ended October 31, 2016, the Adjusted Gross Margins were 49.5% and 49.3% respectively.

Operating Income and Adjusted EBITDA
For the second quarter ended October 31, 2016, operating income increased to $3.2 million from an operating income of $2.7 million for the comparable period last year. For the six month period ended October 31, 2016, operating income increased to $3.4 million from $2.5 million in comparison to the same period last year. These increases are due to the improvement in gross profit partly offset by higher operating expenses.

As a percentage of total revenues, Adjusted EBITDA increased to 12.0% compared to 11.2% and to 10.6% compared to 8.9%, respectively, for the second quarter and the six month period ended October 31, 2016 in comparison to the same periods last year. The improvements of Adjusted EBITDA as a percentage of revenues demonstrate the operational leverage of our cost structure.

Net Income and Adjusted Net Income
For the second quarter and six month period ended October 31, 2016, net income decreased to $2.0 million from $2.6 million and to $1.7 million from $4.0 million, respectively, compared to the same periods last year. These variances were primarily caused by an increase in net financing costs and income taxes, partly offset by the improvement in operating income.

For the second quarter and six month period ended October 31, 2016, Adjusted Net Income increased to $4.6 million from $3.1 million and to $7.4 million from $5.7 million, respectively, compared to the same periods last year. For the second quarter, the variance was primarily caused by an increase in Adjusted EBITDA partly offset by an increase in income taxes, and depreciation and amortization, net of their adjusting items.

Financial Position
Net cash flows generated from operating activities were $5.3 million for the second quarter of Fiscal 2017 compared to $5.1 million for the same period last year. The Company also had, as at October 31, 2016, cash and cash equivalents of $16.9 million and a $40.0 million revolving credit facility of which $5.0 million was used.

Conference Call
Lumenpulse scheduled a conference call to discuss these results on Thursday, December 8, 2016, beginning at 11:00 A.M. (ET). This conference call will be broadcast live on the Internet at the following link: Q2 2017 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: 11898330). The webcast will be archived at www.lumenpulsegroup.com/investors/financial-information/quarterly-results.

Non-IFRS Measures
This press release 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 the 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, professional fees related to business acquisitions, acquired profit on finished goods inventory, change in fair value of contingent consideration, non-cash share-based compensation, relocation expenses, employee termination costs, expenses for unrealized gains or losses on revalued cash share-based compensation, depreciation of leasehold improvements and unusual deferred income tax asset recognition have been recognized in prior periods and could reoccur in future periods, Management excludes these charges, net of taxes, 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 Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Gross Profit and 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.

Glossary of Adjusted Non-IFRS Measures
Adjusted EBITDA is defined as earnings before net financing (income) costs, income taxes (recovery), and depreciation and amortization, employee termination costs, professional fees related to business acquisitions, acquired profit on finished goods inventory, non-cash share-based compensation, relocation expenses and unrealized gains or losses on revalued cash share-based compensation.

  • Unrealized (gains) or losses on revalued cash share-based compensation is defined as gains or losses on revalued cash share-based compensation which have been expensed and are 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 employee termination costs, professional fees related to acquisitions, acquired profit on finished goods inventory, non-cash share-based compensation, relocation expenses, unrealized gains or losses on revalued cash share-based compensation, amortization of acquired intangible assets, unusual deferred income tax asset recognition, change in fair value of contingent consideration and additional depreciation expense on leasehold improvements caused by the reassessment of their useful life as a result of the upcoming relocation of the Montreal facility, net of taxes.

  • Unusual deferred tax asset recognition is defined as the deferred income tax asset recognized by assessing the measurement and recoverability of operating tax losses.
  • Change in fair value of contingent consideration is related to the achievement of certain financial performance targets in specific periods following the acquisitions of Exenia and Fluxwerx.

Adjusted Gross Profit is defined as gross profit less non-cash share-based compensation, acquired profit on finished goods inventory, unrealized gains or losses on revalued cash share-based compensation and depreciation and amortization.

Adjusted Earnings (Loss) per share – basic is defined as the Adjusted Net Income (Loss) on the weighted average number of ordinary shares outstanding during the period.

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.


Reconciliation of Non-IFRS measures

  1. Acquired profit on finished goods inventory related to Exenia.
  2. Relocation expenses related to the new Montréal facility
  3. Professional fees related to the business acquisitions of Fluxwerx, Exenia, SDL Lighting Inc., Ariane Controls Inc. and asset acquisition of Projection Lighting Limited.
  4. Certain Fiscal 2016 comparative figures have been reclassified to be aligned with the Fiscal 2017 definitions.
  5. Refer to “Other Liabilities (including current portion)” in our MD&A filed for the Second Quarter Fiscal 2017 for more details on Change in fair value of contingent consideration.
  6. Additional depreciation expense on leasehold improvements caused by the reassessment of their useful life as a result of the upcoming relocation of the Montréal facility.
  7. Tax impact of the adjusting items in order to present them net of taxes.

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”, “outlook”, “target”, “goal”, “guidance”, “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. Statements with respect to potential benefits and synergies resulting from completed transactions and to future accretion to earnings per share constitute forward-looking information. Forward-looking information includes statements relating to annual targets, outlook, guidance and updates. See Assessment of the Company’s Performance against Long-Term Guidance and Fiscal 2017 Financial Outlook in the Company’s Management’s Discussion & Analysis filed for the Second quarter Fiscal 2017 with the Canadian securities regulatory authorities, which is available on the SEDAR website at www.sedar.com.

Forward-looking information is provided for the purposes of assisting the reader in understanding the Company’s financial performance, financial position, cash flows, its business, operations, prospects and risks at a point in time, and to present information about Management’s current expectations and plans relating to the future and therefore the reader is cautioned that such information may not be appropriate for other purposes.

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 discussed under “Risk Factors” in the Company’s Management’s discussion & Analysis filed for the Second Quarter Fiscal 2017.

Although the forward-looking information contained herein is based upon what we believe are reasonable assumptions, investors are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking information. These assumptions, risks and uncertainties include, but are not limited to, the risk factors identified in and the assumptions used in preparing our Fiscal 2017 financial guidance found under the section “Fiscal 2017 Financial Outlook” of the Company’s MD&A filed for the Second Quarter Fiscal 2017 with the Canadian securities regulatory authorities, which is available on the SEDAR website at www.sedar.com.

Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, 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 and the Company reserves the right to change, at any time at its sole discretion, its current practice of providing annual targets and guidance.

About Lumenpulse Group
Founded in 2006, the Lumenpulse Group designs, develops, manufactures and sells a wide range of high performance and sustainable specification-grade LED lighting solutions for commercial, institutional and urban environments. The Lumenpulse Group 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, two Red Dot Product Design Awards and a Lightfair Innovation Award. The Lumenpulse Group now has 653 employees worldwide, with corporate headquarters in Montreal, Canada, and offices in Vancouver, Québec City, Boston, Paris, Florence, London and Manchester. Lumenpulse Inc., the parent company of the Lumenpulse Group, is listed on the Toronto Stock Exchange under the symbol LMP. For more information, visit www.lumenpulsegroup.com.

For further information, please contact:
Elisabeth Hamaoui
Investor Relations | M&A
(514) 937-3003 ext. 388
ehamaoui@lumenpulse.com
www.lumenpulsegroup.com



[1] Please refer to our definitions and reconciliations of these non-IFRS financial measures at the end of this document.

[2] The calculations for the Earnings per share – Diluted and Adjusted Earnings per share - Diluted for the second quarter and the six-month period ended of October 31, 2016 include the effect of 1,184,672 and 1,174,154 stock options, respectively, which are deemed to be dilutive.

[3]Acquisition Growth reflects the period-over-period increase in revenues attributable to the revenues of the acquired product portfolios realized for the commensurate period prior to their acquisition.

[4] Organic Growth reflects period-over-period growth of all our product portfolios including the growth of acquired product portfolios over their existing revenues for the commensurate period prior to their acquisition.

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