H2O Innovation Reports Record-High Revenues and Successful Integration of Utility Partners

H2O Innovation (TSXV:HEO) has announced its results for its Q4 ended June 30, 2017.
As quoted in the press release:

 H₂O Innovation’s revenues for fiscal year 2017 increased by 63.3% to $82.8 M, up from revenues of $50.7 M for fiscal year 2016, generating a gross profit margin of 23.1%. This year’s growth is mainly fueled by the acquisition of Utility Partners on July 26, 2016, which impacted sales by adding $33.2 M in recurring revenues. The significant increase of revenues due to Utility Partners’ acquisition was subdued by uncontrollable delays in projects schedule. The consolidated backlog as of June 30, 2017 stood at $109.0 M, with $53.9 M coming from our projects business pillar (“Projects”) and $55.1 M from the O&M activities.
On the Projects side, revenues in fiscal year 2017 stood at $20.0 M compared to $23.0 M in fiscal year 2016, representing a 12.7% decrease. This decrease is mostly attributable to a shift in the nature of our water treatment projects, which means more municipal projects characterized by a more extensive engineering phase, increasing the gaps in revenue recognition. Projects schedule has been postponed due to situations out of the control of the Corporation, resulting in delays of revenue recognition. “Nevertheless, the launch of the flexMBR™ technology during the first quarter of fiscal year 2017 allowed us to significantly increase our presence in the wastewater market with bookings of $13.0 M, compared to $0.7 M in fiscal year 2016. The current pipeline of Projects remains very rich in opportunities, supported by a $53.9 M projects backlog”, stated Frédéric Dugré, President and Chief Executive Officer of H₂O Innovation.
In this fiscal year 2017, the Corporation generated a 23.1% gross profit before depreciation and amortization, a decrease compared to the 30.7% gross profit before depreciation and amortization generated in fiscal year 2016. This decrease is explained by the revenue mix, which has been modified with the acquisition of Utility Partners. Utility Partners operates in a different model than the other Corporation’s core activities. Indeed, O&M activities generally generates lower gross margin. Therefore, the integration of Utility Partners into H₂O Innovation, which in this fiscal year represents 40.1% of the total revenues, puts pressure on the overall gross margin of the Corporation, although increasing the predictability and stability of the financial results.

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