UGE Reports Third Quarter 2019 Financial Results

Strategic Transition Continues with Business Ramping Up in Growth Markets

Toronto, Ontario--(Newsfile Corp. - November 14, 2019) - UGE International Ltd. (TSXV: UGE) (OTCQB: UGEIF) (the "Company" or "UGE"), a leader in solar energy solutions for the commercial and industrial sector, reported its financial results for the three and nine months ended September 30, 2019. UGE reports all amounts in US dollars.

In the third quarter of 2019, UGE showed continued progress in its transition towards higher margin, self-developed projects in the US and Philippines. Several improvements in UGE's Q3 results demonstrate that the Company is emerging from this transition:

- Gross margins substantially increased, from 13% to 29%, as the Company focuses on more profitable markets
- SG&A decreased 35% year over year, after the Company downsized less profitable areas of the Company in late 2018
- Net finance costs decreased 69%, after the Company retired the vast majority of its debt in late 2018
- EBITDA results improved 34% and net loss decreased 68%, despite lower revenue, as the Company works towards sustained profitability in the near future
- Company backlog continues to increase and reached $31.1 million at quarter-end, 94% of which was in the US and Philippines markets.

As the Company drives an increase in business in the US and Philippines, at the end of the second quarter, 17 projects had entered the early stages of deployment in the US, as well as 10 in the Philippines, strong indicators that revenue growth will accelerate in the immediate future. In the early stages of project deployment, recognized revenue is usually marginal as the Company completes engineering, permitting, and interconnection. Subsequently, when equipment is procured and installed, the vast majority of project revenue is recognized.

Select Financial Information



Three months ended Sept. 30,Nine months ended Sept. 30,


2019201820192018
Revenue  $496,404$4,166,708$3,505,927$13,654,866
Cost of sales        (405,340)(3,629,087)(2,500,919)(11,818,949)
Gross profit91,064537,6211,005,0081,835,917
Gross profit margin18%13%29%13%
Expenses    
Selling, general, and administrative
(769,697)(1,145,585)(2,347,237)(3,609,489)
Project-related gain (loss)
-(159,115)-(809,293)
Share-based compensation
(15,873)-(142,125)-
Loss from operating activities$(694,506)     $(767,079)$(1,555,195)$(2,582,865)
Impairment loss
---(2,981,198)
Bad Debts
(70,834)-(170,838) 
Gain on conversion of debt to equity
68,989-190,026 
Other income
37939,53425,124939,534
Accretion Expense
(17,732)-(53,108) 
Net finance costs
(101,534)(126,521)(199,911)(648,914)
Income (loss) before income taxes$(815,580)$45,934$(1,763,902)$(5,273,443)
Income tax recovery (expense)
72,15366,880(4,809)(48,652)
Net income (loss) for the period$(743,427)$112,814$(1,768,711)$(5,322,095)
Adjusted EBITDA(570,178)(671,183)$(1,109,849)$(1,668,078)
Loss per share - basic and diluted$(0.01)$-$(0.02)$(0.13)

 

Analysis of Financial Results

Revenue for the nine months ended September 30, 2019 was $3.5 million, a 74% decrease from the same period of the prior year, as the Company completed past engineering, procurement and construction ("EPC") projects from our Canadian entities and worked through the early stages of a significant number of new projects in the US and the Philippines, 27 in total across these two key markets.

Gross profit margin for the nine months ended September 30, 2019 increased to 29%, compared with 13% in the comparable time period. Revenue quality showed significant improvements, both in terms of the results of closing out past EPC projects, and in the higher margins expected from new projects. The expected average gross margin across Company backlog continues to be approximately 23%, in line with UGE's goals for positive EBITDA in the near future.

SG&A expenses for the nine months ended September 30, 2019 were $2.3 million, compared with $3.6 million in the same period of the prior year, a decrease of 35%. The decrease is attributable to the Company's move to proactively decrease costs in less profitable business units in late 2018 as we work towards achieving sustainable profitability based on increased revenue and higher margins in our growth markets. Net finance costs decreased 69%, from $0.6 million to $0.2 million, driven by UGE's move to convert $5.3 million of debt to equity in late 2018.

The Company's net loss for the nine months ended September 30, 2019 decreased 68%, to $1.7 million, or $0.02 per share, compared with a loss of $5.3 million, or $0.13 per share, in the same period of the prior year. The vastly improved results were due to the impairment loss recorded in the second quarter of 2018, as well as the Company's efforts to decrease costs and increase margins as it works towards achieving sustainable profitability.

"The third quarter saw us move a significant number of new projects forward, including the procurement of 4.6MW of solar panels," said UGE's CEO, Nick Blitterswyk. "With 27 new projects underway in the US and Philippines, we are excited to significantly build on our emergence from the transition in the last months of 2019, and to see much improved results going forward."

Full financial results and Management's Discussion and Analysis are posted to SEDAR (www.sedar.com) and are available through the Company's website.

About UGE

UGE delivers immediate savings to businesses through the low cost of solar energy. We help commercial and industrial clients become more competitive by providing low cost distributed renewable energy solutions at no upfront cost and maximum long-term benefit. With over 380 MW of global experience, we work daily to power a more sustainable world. Visit us at www.ugei.com.

For more information, contact:

917-720-5685
investors@ugei.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/49770

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