UGE Reports Third Quarter 2016 Financial Results
New York, New York--(Newsfile Corp. - November 29, 2016) - UGE International Ltd. (TSXV: UGE) (OTCQB: UGEIF) (the "Company" or "UGE"), a leader in renewable energy solutions for the commercial and industrial sector, reported its financial results for the three and nine months ended September 30, 2016. UGE reports all amounts in US dollars.
Third Quarter 2016 Highlights
During the quarter, UGE divested its loss-making wind energy subsidiaries, which management had deemed non-core to its ongoing strategy. The divestiture lowered expense levels, strengthened the Company's balance sheet, and focused management on its core offering in the commercial solar market. The transaction was accounted for as discontinued operations in the third quarter financial results.
The Company recognized a gain of $5.2 million from the divestiture of the wind energy operations and net overall income of $4.3 million; a loss from continuing operations of $0.9 million included a non-cash adjustment of $0.4 million from a settlement agreement related to the Endura Energy Project Corp. ("Endura") acquisition.
UGE was awarded several new projects during the quarter, including Christian Cultural Center in Brooklyn, Philippine Spring Water Resources, and a ground mount project in Kaladar, Ontario. The wins brought the Company's total backlog to $36.4 million, representing significant upcoming revenue for future quarters.
Gross margins strengthened to 18% in the quarter, while revenue fell to $735,903 in the quarter from $1,266,113 in the prior period, largely due to the timing of project deployments.
Following the divestiture of the wind energy operations and completion of the Endura acquisition, quarterly expenses were $0.8 million, which management expects will be representative of expense levels in the coming quarters.
Selected Financial Information
Analysis of Financial Results
UGE's financial statements for the three and nine months ended September 30, 2016 include discontinued operations for its former wind energy operations, which were divested on September 6, 2016. As such, financial results for prior periods have been restated on the same basis. For further information, please see the Company's condensed consolidated interim financial statements, management discussion and analysis, and shareholder newsletter found on the Company's website.
The Company would like to draw attention to the following points from its financial statements:
Largely as a result of project timing, revenue for the quarter declined to $735,903 from $1,266,113 in the prior period; deferred revenue, exemplifying near term revenue milestones at September 30, 2016, exceeded $2.5 million.
Gross margins for the quarter were 18%, versus slightly negative margins in the comparable period; the increase was driven by contracting more profitable projects as well as the Company's revenue recognition policy which now uses the percent completion method, which has been utilized following the acquisition of Endura.
Selling, General and Administrative expenses were $0.8 million in the quarter, representing the Company's expected level going forward following the completion of the Endura acquisition and the divestiture of the wind-focused subsidiaries.
UGE recorded a loss from continuing operations of $0.9 million in the quarter, including a $0.4 million non-cash adjustment related to the Endura acquisition, and a result of the timing of project deployments; however, due to a gain from the sale of the wind energy operations, UGE reported net income for the period of $4.3 million, as compared with a net loss in the prior period of $1.2 million.
"We continue to make great strides towards strengthening our market share and reaching profitability through higher revenue and gross margins, combined with prudent expense levels" stated Nick Blitterswyk, CEO of UGE. "Our expense levels and gross margins are now generally in line with our goals, and with our significant order backlog we expect revenues to reach our goals in the very near future as well."