November 12, 2008
Carmanah Q3 2008 Delivers Sustained Growth and Profitability
Carmanah Technologies Corporation (TSX: CMH) today announces its third quarter financial results for the three-month period ending September 2008.
In Q3 2008, Carmanah's recent strategic renewal and restructuring initiative proved especially timely, as the newly streamlined Company navigated challenging global market conditions to deliver its third profitable EBITDA quarter (adjusted for restructuring charge) in a row. While supporting the restructuring initiatives announced in June, the Company introduced a new flagship product to its line of solar LED marine lanterns, entered into a partnership with Wireless technology provider ENCOM, and reported significant sales wins in key target markets including aviation lights for airfields in the Middle East and solar power systems for telecommunication towers in North Africa.
Highlights for the Quarter
-- Sales results: $13.9 million down $1.6 million from the same period in 2007, although sales are 4.7% higher when the Q4 2007 sale of the home power business is factored in -- Gross margin up: 37.7% for 2008, up from 30.5% in 2007 -- Operating costs reduced: $4.6 million (excluding restructuring costs) down from $5.3 million for the same period of 2007 - restructuring charge of $0.5 million during the three month period ended September 30, 2008, compared to nil for the same period of 2007 -- Improved bottom line: Net income of $0.8 million, up from a net loss of $0.8 million in the same period of 2007 -- Higher Adjusted EBITDA: Adjusted EBITDA of $1.5 million, up from negative $0.8 million in the same period of 2007 -- Positive cash flow from operations: $0.2 million, compared to $1.5 million for the same period in 2007 which was due to a one-time reduction of surplus inventory -- Cash balance increased: $5.5 million, up from $1.4 million in the same period of 2007 -- Nil debt: Continued debt-free operation
Summary of Results
The third quarter of 2008 saw continued progress towards Carmanah's renewed corporate objectives announced at the start of the year, including the ongoing implementation of the major restructuring initiatives introduced in Q2 to support the Company's return to sustained, profitable growth.
According to Ted Lattimore, Carmanah CEO, this renewed focus on the Company's core strengths, combined with a commitment to maximizing efficiency and controlling costs, has helped prepare the Company to weather the recent global economic conditions. "Even in today's challenging times, we can now see how our broad based restructuring last quarter has resulted in our increased strength today," said Lattimore. "With the majority of our transition behind us, Carmanah is now prepared to face the challenges ahead as a much leaner, more focused and responsive business. I am confident that our team has the focus, commitment and skill to persevere, and that the current rocky markets will merely test and clarify our strategy. Even with the challenges of today's stock market, our operating costs remain low, we have cash in the bank, and we're maintaining an overall financial position that is increasingly enviable these days. The key over the coming months will be to keep sales coming, and with our strong industrial markets, our new global sales team and some exciting new products, we're well prepared to do just that."
Carmanah CFO, Roland Sartorius, added, "...our recent efforts to control costs and support sustained, profitable growth could not have come at a better time. Guided by solid business metrics, our net cash balance has grown from a 2007 low of negative $2 million to more than $5 million as at Q3 2008. We've maintained our positive growth trend -- with no bank debt -- and recorded our third quarter of positive Adjusted EBITDA and cash flow results in a row," said Sartorius. "Thanks to our loyal customer base, our relevant technology, and an unfaltering commitment to sustainable growth and solid business fundamentals, we believe that Carmanah is in good financial shape for whatever challenges lay ahead -- even in today's changeable economic environment."
Sales for the third quarter of 2008 were $13.9 million; $1.6 million lower than the same period in 2007, due in part to the Company's exit of the tactical distribution business, and from delayed shipments on certain power systems orders.
A summary of revenues from each of the Strategic and Tactical business segments is shown below:
Sales For the three months ended Sept. 30, ($ thousands) 2008 2007 Change $ Mix $ Mix $ % -------------------------------------------------------------------------- Strategic Solar LED Lights 7,073 50.9% 5,857 37.7% 1,216 20.8% Solar Power Systems 646 4.6% 1,146 7.4% (500) (43.6%) 7,719 55.5% 7,003 45.1% 716 10.2% Tactical Distribution 4,158 29.9% 6,582 42.4% (2,424) (36.8%) Signage 2,025 14.6% 1,938 12.5% 87 4.5% 6,183 44.5% 8,520 54.9% (2,337) 27.4% -------------------------------------------------------------------------- Total 13,902 100.0% 15,523 100.0% (1,621) 10.4%
Summary of EBITDA and Net Income
-- Adjusted EBITDA for Q3 2008 was $1.5 million, up from $(0.8) million for the same period of 2007 -- Adjusted EBITDA year to date was $2.5 million, up from $(5.0) million for the same period of 2007 -- Net income for Q3 2008 was $0.8 million up from a net loss of $0.8 million in the same period of 2007 -- Net income year to date was $0.5 million, up from a loss of $4.3 million for the same period of 2007
The Company uses certain non-GAAP measures to assist in assessing its financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. One such non-GAAP measure used for assessing financial performance is net income (loss) before interest, income taxes, amortization, and restructuring charge ("Adjusted EBITDA").
Adjusted EBITDA reconciliation Three months ended Nine months ended ($ thousands) Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2008 2007 2008 2007 -------------------------------------------------------------------------- Net income (loss) 800 (765) 529 (4,279) Add (deduct): * Interest (22) 32 (81) 116 * Income taxes (312) (311) 6 (1,653) * Amortization 759 294 1,280 863 * Restructuring charge 230 - 781 - --------------------------------------------------------------------------- Adjusted EBITDA 1,455 (750) 2,515 (4,953)
Progress During the Quarter (including subsequent events)
With a 2008 third quarter Adjusted EBITDA of $1.5 million, up from $(0.8) million in the same period of 2007, the third quarter of 2008 continues the momentum initiated at the start of the year. During this quarter, Carmanah made continued progress in implementing the four major restructuring initiatives -- introduced June 25th, 2008 in Q2 -- designed to further refine and accelerate the Company's focus on its strategic direction:
-- Transitioning manufacturing to global electronics manufacturing services provider Flextronics International. -- Exiting its solar component and solar-powered bus shelter distribution businesses, while consolidating its operations by closing its US solar component distribution business, Santa Cruz, California warehouse, and Calgary, Alberta office and warehouse. -- Moving to a more efficient regional geographic sales model by restructuring its global sales force from a vertical-specific format to a regional geographic model that will make all Carmanah products available to all complementary markets. -- Simplifying its organizational structure and reducing costs through continued operational efficiencies companywide.
Other highlights during this quarter included:
-- Carmanah received a $1.2 million order for solar-powered airfield lights follow up order through Dubai-based GESOLAR -- the company's aviation distributor in the United Arab Emirates -- to supply additional solar-powered portable airfield lights for civilian airfield applications. (September 30, 2008) -- Carmanah announced the M708 marine lantern -- the new flagship in its line of solar-powered marine beacons. Combining an advanced optical design with high-efficiency solar modules and high-efficacy LEDs, the M708 is Carmanah's highest output LED marine lantern to date. (September 22, 2008) -- Carmanah received an initial $1 million order from Lyon, France-based telecom provider TWIST to supply solar power systems for a telecommunications project in North Africa. The project, facilitated by Solergitech, Carmanah's distributor in the region, will power a network of telecommunications towers with the company's stand-alone solar power systems. As a part of an ongoing project with an estimated value of up to $6 million over the next three years this project represents a significant market opportunity for Carmanah. (September 12, 2008) -- Carmanah partnered with ENCOM Wireless Data Solutions Inc. to add a wireless interface capability to its line of stand-alone solar-powered traffic beacons. This arrangement represents the next step in the evolution of Carmanah's solar powered LED (light emitting diode) lighting technology for traffic applications. (July 15, 2008) -- Carmanah received a $2.1 million order for solar-powered airfield lights from the United States Marine Corp. for installations in the Middle East. (July 08, 2008)
Complete set of Financial Statements and Management Discussion & Analysis
A complete set of the third quarter 2008 Financial Statements and Management's Discussion & Analysis are available on Carmanah's corporate website. To view full financials, visit: www.carmanah.com/content/investors/financialreports.aspx.
Conference Call Details
To discuss the third quarter 2008 results, Carmanah has scheduled a conference call for 2:00 pm PT (5:00 pm ET) on Wednesday, November 12, 2008. To access this conference call by telephone, dial 1.888.882.9090 (Canada and US) or +1.403.770.0861 (international) approximately five to ten minutes before start time. When prompted for the participant code, enter 2510558.
A recording of the conference will also be available on Carmanah's corporate web site within three business days. For more information, visit www.carmanah.com.
About Carmanah Technologies Corporation
As one of most trusted names in solar technology, Carmanah has earned a reputation for delivering strong and effective products for industrial applications worldwide. Industry proven to perform reliably in some of the world's harshest environments, Carmanah's LED lights, LED edge-lit signs and stand-alone power systems provide a durable, dependable and cost effective energy alternative. Carmanah is a publicly traded company, with common shares listed on the Toronto Stock Exchange under the symbol "CMH." For more information, visit www.carmanah.com.
Carmanah Technologies Corporation "Roland Sartorius" Roland Sartorius, Chief Financial Officer
This release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "expects,""plans,""estimates,""intends,""believes,""could,""might,""will" or variations of such words and phrases. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Carmanah to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties which are described under the caption "Note Regarding Forward-looking Statements" and "Key Information - Risk Factors" and elsewhere in Carmanah's Annual Report for the fiscal year ended December 31, 2007, as filed on SEDAR at www.sedar.com. The risk factors identified in Carmanah's Annual Report are not intended to represent a complete list of factors that could affect Carmanah. Accordingly, readers should not place undue reliance on forward-looking statements. Carmanah does not assume any obligation to update the forward-looking information contained in this press release.
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For further information: Investors: Investor Relations: Roland Sartorius Toll-Free: 1.877.722.8877 Email Contact Media: Public Relations: David Davies Tel: +1.250.382.4332 Email Contact
SOURCE: Carmanah Technologies Corporation