UGE REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS
Strategic Transition on Track as Business Ramps Up in Growth Markets While Company Makes Significant Improvements in Gross Margins, Overhead Expenses
Toronto, Ontario--(Newsfile Corp. - August 27, 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 six months ended June 30, 2019. UGE reports all amounts in US dollars.
In the second quarter of 2019, UGE showed significant progress in its transition towards higher margin, self-developed projects in the US and Philippines. A number of improvements in UGE's Q2 results demonstrate that the Company is emerging from this transition:
Gross margins substantially increased, from 14% to 30%, as the Company focuses on more profitable opportunities
SG&A decreased 34% year over year, after the Company downsized less profitable areas of the Company in late 2018
Net finance costs decreased 88%, after the Company retired the vast majority of its debt in late 2018
Net loss decreased 82%, despite lower revenue results, as the Company works towards sustained profitability in the near future.
In Canada, several projects reached final completion, including the entire 15-site portfolio in Peterborough which drove revenue results in 2018 but at margins below Company targets. Meanwhile, at the end of the second quarter, 14 projects had entered the early stages of deployment in the US, as well as 11 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. A 92% increase in contracted backlog, from $3.7 million on December 31, 2018 to $7.1 million on June 30, 2019, also shows progress towards increased revenue generation. Overall backlog as of June 30, 2019 was $27.4 million, two-thirds of which was in the USA.
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Analysis of Financial Results
Revenue for the six months ended June 30, 2019 was $3.0 million, a 68% 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.
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 gross profit margin for the six months ended June 30, 2019 increased to 30%, compared with 14% in the comparable time period. 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 six months ended June 30, 2019 were $1.6 million, compared with $2.4 million in the same period of the prior year. The 34% decrease is attributable to the Company's move to proactively decrease costs in less profitable business units in late 2018. Net finance costs decreased 88%, from $0.5 million to $0.1 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 three months ended June 30, 2019 decreased 91%, to $0.4 million, or $0.01 per share, compared with a loss of $4.6 million, or $0.11 per share, in the same period of the prior year. For the six months ended June 30, 2019, the net loss was $1.0 million, compared with $5.4 million in the same period of the prior year, a decrease of 82%. 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 second quarter saw us hit our targets for completing past projects and starting new ones as we look to return to positive EBITDA by the end of 2019," said UGE's CEO, Nick Blitterswyk. "With 25 new projects started in the US and Philippines, we are confident and excited that we are now emerging from the transition and will see improving 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.
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.
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