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