Spark Power Group Inc.: Spark Power Posts Strong Earnings Growth in the First Quarter

First Quarter Gross Profit Margin of 25.1%; up 460 bps year-over-year

Core Business Adjusted EBITDA up $4.3 million year-over-year

Amended Credit Agreement Signed to Reset Covenants

(Spark Power reports in Canadian dollars unless otherwise specified)

OAKVILLE, ON / ACCESSWIRE / May 11, 2023 / Spark Power Group Inc. (TSX:SPG), parent company of Spark Power Corp. ("Spark Power" or the "Company"), has announced its financial results for the three-month period, ended March 31, 2023. All amounts are in Canadian dollars unless otherwise specified.

"I am pleased to see gross margin expansion in our core business lines and improvement on EBTIDA margins as we execute our go-to-market plans that are part of our new 3-year "Let's Grow Better" strategy, intentionally shifting our business to pursue more profitable growth opportunities," said Richard Jackson, President & CEO, Spark Power Corp. "We achieved a significant milestone in the first quarter as part of our 'One Spark' platform integration, with our entire US business now on a single ERP system, paving the way for an improved customer experience and the realization of a scalable platform to support future growth," added Jackson.

"Our ongoing efforts to improve gross margin realization and rationalize our cost structure are evident in our results," said Richard Perri, Executive Vice President & CFO of Spark Power Corp. "We continue to generate positive cash flow from operations, with a focus on speed to invoice, and anticipate increasing free cash flow as our US ERP migration achieves steady state through the second quarter. With the Bullfrog Power Inc. transition completed, we worked with our lender to reset our banking covenants to align with the core business. We are poised to execute on the next stage of our strategic initiatives; scaling for accretive earnings growth and delivering shareholder value," added Perri.

Financial Highlights - Q1 2023

• Revenue from continuing operations was $65.8 million in Q1 2023, as compared to $66.2 million in Q1 2022, representing a decrease of 0.6% year-over-year. The year-over-year change reflects the ramp-up of our new go-to-market strategy to pursue higher margin service work and prior period comparatives that include large project work in the Technical Services segment.
• Gross Profit Margins from continuing operations, excluding depreciation and amortization, were 25.1% in Q1 2023, as compared to 20.5% in Q1 2022. The year-over-year improvement reflects the benefits of the gross margin enhancement initiatives executed through 2022 and the improving revenue mix.
• Selling, General and Administration (S, G&A) expenses from continuing operations, excluding depreciation and amortization, were $11.8 million, down $1.3 million, or 10.2% from Q1 2022 reflecting the impact of the cost actions executed in 2022.
• Adjusted EBITDA from continuing operations was $5.0 million or 7.7% of revenue in Q1 2023, excluding foreign exchange losses of $0.3 million in the quarter. This compares to Adjusted EBITDA of $0.7M or 1.1% of revenue in Q1 2022. The significant year-over-year improvement in the core business reflects the positive benefits of the targeted gross margin and cost actions implemented over the last twelve months to counteract the headwinds of cost inflation in the prior year.
• Cash flow from operations was $1.9 million in the quarter, compared to cash used by operations of $13.7 million in Q1 2022. This represents the third consecutive quarter of positive cash flow generation from operations, as supported by lower Contract Asset balances tied to improving invoice cycle time. This was offset to a certain extent by the impact of the US Renewables go-live at the start of the year, resulting in delayed January billings that inflated Accounts Receivable at the end of the period.

Business Highlights - Q1 2023

• In the first quarter, Spark Power officially launched "Let's Grow Better," its new 3-year strategy for 2023-2025, throughout the organization with the first wave of initiatives focused on the new go-to-market strategy, as well as maturing Spark's US operations. This strategy is designed to drive intentional growth, to create sustainable and long-term value for shareholders as a fully integrated platform company.
• The Company is continuing its enterprise-wide technology and business process integration initiative, Project Darwin, with the successful completion of the second migration of its Renewables US business in the first quarter of the year. This has resulted in all US operating companies being brought onto one platform with standardized processes and operating protocols. The new system is expected to provide an improved customer experience, operational efficiencies in both the field and back office, and the creation of a scalable platform to support future growth.
• The first go-live of the new Enterprise Resource Planning (ERP) software installation occurred in September 2022.
• The final integration of the Canadian business is currently being planned and is on track to be completed by the end of the year.
• Following the divestiture of Bullfrog Power Inc. in Q4 2022, formerly the Sustainability Solutions Segment, the Company completed the transition plan to decouple and migrate the IT systems to the buyer as well as back-office support as part of a transition services agreement. This work was substantially completed by the end of the quarter.
• The Company worked with its lender to revise the financial covenants per the amended and restated credit facility signed on November 30, 2022, to reflect the divestiture of Bullfrog Power from historical comparatives, as well as the impact of higher interest rates over the last six months. The new terms of the amendment come into effect in Q2 2023 and include an option to extend the maturity date into 2025. The revised covenants are as follows:
  • Minimum fixed charge coverage ratio of 0.85 for the quarter ended June 30, 2023, increasing to 1.05 and 1.15 for the quarters ending September 30 and December 31, 2023, respectively, and 1.25 for each fiscal quarter thereafter; and
  • Maximum total debt to EBITDA ratio based on the most recently completed four fiscal quarters of 4.25:1.00 for the quarter ending June 30, 2023, decreasing to 3.75:1:00 for each quarter thereafter.

Financial Outlook

Spark Power's First-Quarter 2023 Management Discussion and Analysis includes an Outlook section with a Business and Financial Outlook update. The latter includes some ranges of performance targets for various financial metrics for the Company in fiscal 2023.

Quarterly Conference Call

Management is hosting an investor conference call and webcast on Tuesday, May 16, 2023, at 8:30 a.m. ET to discuss its financial results in greater detail. To join by telephone dial: [phone] (toll-free in North America) or [phone] (local and international), with conference ID: 48345 and entry code: 585333. To listen to a live webcast of the call, please visit the investor relations section of Spark Power's website at https://sparkpowercorp.com/about-us/investor-relations/. An archived replay of the webcast will be available following the conclusion of the call.

Please dial in or log on 10 minutes prior to the start time to provide sufficient time to register for the event.

Spark Power's First-Quarter 2023 Interim Unaudited Condensed Consolidated Financial Statements and Management Discussion and Analysis are available on Spark Power's website www.sparkpowercorp.com and will be filed on SEDAR at?www.sedar.com.

About Spark Power

Spark Power is the leading independent provider of end-to-end electrical services and operations and maintenance services to the industrial, utility, and renewable asset markets in North America. We work to earn the right to be our customers' Trusted Partner in Power. Our highly skilled and dedicated people, located in the communities we serve, combined with our knowledge of the power industry, technology expertise, and commitment to safety, ensures we deliver the right solutions that keep our customers' operations up and running today and better equipped for tomorrow. Learn more at www.sparkpowercorp.com.

Forward-Looking Statements

This news release may contain forward-looking statements (within the meaning of applicable securities laws), which reflect Spark Power's current expectations regarding future events. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. The forward-looking statements in this press release include statements regarding the Company's opportunities for future growth, acquisitions and expansions, future liquidity, pro forma annualized costs, the calculation of charges, and other statements that are not historical fact, and without limitation, include statements by Messrs. Jackson and Perri regarding execution on Spark Power's growth strategy, earnings growth, SG&A efficiency realizations, the stabilizing global economy, the support of third parties, and the successful implementation Spark Power's technology platform. The forward-looking statements in this news release are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Several factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Such factors include, among others: the ability of the Company to implement its planned efficiency measures; currency fluctuations; disruptions or changes in the credit or security markets; results of operations; and general developments, market and industry conditions. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, neither Spark Power Group Inc. nor Spark Power Corp. assumes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-IFRS Measures

The Company prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, the Company also discloses and discusses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS. These include "EBITDA", "Adjusted EBITDA", "Pro-forma Adjusted EBITDA", "EBITDA Margin", "Adjusted EBITDA Margin", "Adjusted Working Capital", and "Adjusted Net and Comprehensive Income (Loss)". These non-IFRS measures are used to provide investors with supplemental measures of Spark Power's operating performance and highlight trends in Spark Power's business that may not otherwise be apparent when relying solely on IFRS measures. Spark also believes that providing such information to securities analysts, investors and other interested parties who frequently use non-IFRS measures in the evaluation of issuers will allow them to better compare Spark Power's performance against others in its industry. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. For a reconciliation of these non-IFRS measures, see the Company's management's discussion and analysis for the three months ended March 31, 2023. The non-IFRS measures should not be construed as alternatives to results prepared in accordance with IFRS.

Selected Consolidated Financial Information:

Reconciliation of Net loss to EBITDA and Adjusted EBITDA:

The following table is a summary of Spark Power's results from continuing operations for the periods indicated:

Investor and Regulatory Inquiries:
Richard Perri, Executive Vice President & Chief Financial Officer
[e-mail]
[phone]

Media Inquiries:
Lauren D'Andrea, Manager of Corporate Communications & Brand
[e-mail]
[phone]

SOURCE: Spark Power Group Inc.

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