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First Quarter 2015 Results Earnings Conference Call
September 11th, 2014
Forward-Looking Information
This document contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Such forward-looking information includes, but is not limited
to, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations,
estimates and intentions. This forward-looking information is identified by the use of terms and phrases such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”,
“anticipate”, “plan”, “foresee”, “believe”, or “continue”, the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking
information contains these terms and phrases. Forward-looking information is provided for the purposes of assisting the reader in understanding the Company and its business,
operations, prospects and risks at a point in time in the context of historical and possible future developments and therefore the reader is cautioned that such information may not
be appropriate for other purposes.
Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond our control, which could
cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited
to, the following risk factors, which are discussed in greater detail under “Risk Factors” in our annual information form filed with the Canadian securities regulatory authorities
(available on the SEDAR website at www.sedar.com): history of losses; maintaining and managing our growth; risks related to global economic conditions; risks related to
international expansion; reliance on third-party agents, distributors and VARs; failure to expand distribution and sales infrastructure and marketing; market acceptance of our
products; new technology; certification and compliance; competition; dependence on third-party suppliers; supply requirements; international supply chain; project-based success;
intellectual property; intellectual property infringement; managing acquisitions; product defects and design risks; reliance on key personnel; adequacy of our facilities; fluctuations
in quarterly operating results; exchange rate fluctuations; commodity price risk; additional capital requirements; risks related to tax matters; reduction or elimination of investment
or incentives for LED technology; brand and corporate reputation; credit risk; and information technology interruptions or breaches. Although the forward-looking information
contained herein is based upon what we believe are reasonable assumptions, investors are cautioned against placing undue reliance on this information since actual results may
vary from the forward-looking information. Certain assumptions made in preparing the forward-looking information and our objectives include: our ability to generate sufficient
revenue while controlling our costs and expenses; our ability to manage our growth effectively; the absence of material adverse changes in our industry or the global economy;
trends in our industry and markets; our ability to manage risks related to international expansion; our ability to maintain good business relationships with our agents and VARs;
our ability to expand our sales and distribution infrastructure and our marketing; our ability to develop products and technologies that keep pace with the continuing changes in
technology, evolving industry standards, new product introductions by competitors and changing client preferences and requirements; our ability to purchase components for our
products at competitive prices; our ability to protect our intellectual property rights; the absence of intellectual property infringement or invalidity claims against us; our ability to
manage and integrate acquisitions; our ability to retain key personnel; and our ability to raise sufficient debt or equity financing to support our business growth.
Consequently, all of the forward-looking information contained in this document are qualified by the foregoing cautionary statements, and there can be no guarantee that the
results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial
condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained in this document is provided as of the date
hereof, and we do not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be
required by applicable law.
2
Presenters
3
Robert Comeau Executive Vice President and CFO
François-Xavier Souvay President and CEO
Lumenpulse Inc.
First Quarter Fiscal 2015 Results François-Xavier Souvay
President and CEO
4
Business Highlights Q1 - Fiscal 2015
5
1 Refers to the asset acquisition of Projection Lighting Limited dated July 1st 2014
Financial Performance
- Consolidated revenue growth of 45.5% despite temporary supply chain issues
- Lumenpulse Products (LP) revenues growth of 61.7% including AlphaLED and 43.4% excluding AlphaLED
- Consolidated Adjusted Gross Margin of 41.9%, including AlphaLED, and LP Adjusted Gross Margin of 43.3%,
(45.1%, excluding AlphaLED)
- Successful 1st month of operations with AlphaLED, with revenues of $1.9 million; in line with our plan
AlphaLED Acquisition1
- Execution of our integration plan on target
International Sales Expansion
- International revenues increased 326%, and represented 24% of our consolidated revenues
- Expanded our market reach through AlphaLED
- 1 new VAR in Japan
- Sales activities progressed in France and Latin America
Product Update
- Momentum is growing for Lumencove Nano and Lumendrive technology
- Added +70 new products with AlphaLED acquisition
5
Manufacturing and Supply Chain 6
While the situation impacted revenues, gross margin and working
capital, the Company has promptly taken steps to address its
temporary supply chain issues, resolved some, and expects
others to be resolved within the second quarter.
6
Issues Actions
The phasing-out of specific LED
components created temporary
shortages with the transition to a new
generation of higher performance
chip
New generation of higher
performance chip should be phased-
in starting in second half of Q2
Logistic issues with a third party
inventory management partner
Terminated the agreement and
moved to a well-established
company with more flexibility to
support our growth
Increased lead time due to the
delayed delivery by an extrusion
supplier
Supplier promptly corrected the
situation. We are also implementing
a strategy which aims to reduce the
risk of single sourcing
Acquisition of AlphaLED
Car Showrooms Museums Shopping Centres
Art Galleries Restaurants Retail Stores
7
Q1 Q2 Q3 Q4
Integration of design & engineering team
completed
Integration of financial reporting
completed
Training of AlphaLED team on Lumenpulse products
North American Product Certification (UL)
Manufacturing of AlphaLED products for North American market
Start progressive AlphaLED product launch in North America
AlphaLED Integration Plan
Executing on our Integration Plan
8
International Expansion
Accomplishments in Q1
International revenues of $4.4 million, 326% growth
− Revenues from AlphaLED totaled $1.9 million
− Large project of approximately $1.4 million in Saudi Arabia
Excluding AlphaLED, International revenues more than
doubled to $2.5 million
LP International revenues reached 27% of LP revenues
Increased market coverage
− Gaining traction in Latin America and France
− Increased our internal sales force from 4 to 12
− Signed a new VAR agreement in Japan
Number of VARs and agents over 90, including 10 in international
markets
9
Product Update
Accomplishments in Q1
15 new products presented at the Lightfair tradeshow in Las Vegas
− Early-stage but gaining traction
− Demand for Lumencove Nano higher than initial expectations
Product portfolio
− Over 70 new products from AlphaLED
− Integration process of Lumenpulse technologies into AlphaLED products
Ongoing cost reduction initiatives
− Reduction in bill of material related to Lumendrive technology (Lumencove Nano)
− LED module price negotiations with suppliers
10 10
Proprietary &
Patented Technologies
27 Patents granted1
Q1 2015: 5 patents granted
55 Patents pending1
11
1 As of July 31st 2014
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Lumenpulse Selected to Improve Conservation Efforts at the Rotunda for the Charters of Freedom: Designed by Boston-based design firm Available Light, the new
LED lighting system has won a 2014 AL Light and Architecture
Design Award for commendable achievement
Lumenpulse Inc.
First Quarter Fiscal 2015 Results Robert Comeau
Executive Vice President and CFO
13
Key Financials
Selected Financial Information
14
(millions CAN$ - except per share data)
Q1 shows solid year-over-year
revenue growth and improving
gross margins
Q1 2015 Q1 2014 Change
Revenues - Consolidated 18.6 12.8 5.8
Growth 46%
Revenues - Lumenpulse products 15.5 9.6 5.9
Growth 62%
Adjusted Gross Margin % - Consolidated1 42% 40% 2 pts
Adjusted Gross Margin % - Lumenpulse Products1 43% 41% 2 pts
Adjusted EBITDA1 (1.0) (0.7) (0.3)
Net loss (2.3) (5.6) 3.3
Adjusted Net loss1 (1.4) (1.9) 0.5
Ajusted EPS (loss per share) - Basic1, 2 ($0.06) ($0.17) 0.11
1 See the Non-IFRS financial measures section
2 Per share amounts reflects retroactively the 8.4 to 1 consolidation of the common shares, that occurred in the fourh quarter of Fiscal 2014.
Preceding the IPO, redeemable shares at the option of the holders were not included in the loss per share calculation.
Revenue Performance
15
(millions CAN$)
LP Y/Y GROWTH: 62% Q1 2015 over Q1 2014
LP Product growth of 18% from Q4 2014 to Q1 2015
Delivered above-market
growth rate
Lumenpulse Products revenues reached
$15.5 million, an increase vs Q1 2014 of:
- 62% including AlphaLED
- 43% excluding AlphaLED
AlphaLED contributed $1.9 million in
one-month to consolidated revenues,
in-line with our expectations
Revenues were impacted in Q1 by
temporary supply chain issues
International Revenues
16
Q1 – Actual Q1 – Normalized1
1 Normalized based on TTM AlphaLED revenues of $20.6 million as per estimates at the time of acquisition, using 1.83 CAD/GBP conversion rate
24%
35%
- International revenues totaled $4.4 million in Q1, including $1.9 million of AlphaLED revenues for the month of July
- Excluding AlphaLED revenues, International revenues increased by 140% to $2.5 million for Q1 from $1.0 million LY
- Normalized quarterly revenue contribution of AlphaLED is $5.1 million1
- Total International revenues trending at 35% of consolidated revenues with AlphaLED fully consolidated
INTL Growth: 326%
(millions CAN$)
Profitability
Adjusted Gross Margin Evolution
17
Q1 Adjusted Gross Margin vs last year
fueled by:
Increasing LP revenue
proportion of total revenues
Improving LP Adjusted GM%
driven by:
- Lower direct costs
- Higher utilization of capacity
- Improved manufacturing efficiency
partially offset by:
- The lower margin contribution of
AlphaLED, which follows a different
profitability model, as expected
- Supply chain disruption
- Unfavourable product and geographic
mix
Adj. LP GM% excluding AlphaLED
Adj. LP GM%
Adj. GM%
OMP GM%
Excluding AlphaLED, Lumenpulse Products Adjusted Gross
Margin increased to 45.1% in Q1 from 40.7% in the same
quarter last year
45%
Profitability
Adjusted EBITDA
18
Q1 2015 decrease in Adjusted
EBITDA driven by:
Lower revenues than expected in
relation to Q1 supply chain
disruption which also impacted
gross margin
Increased operating expenses
with headcount additions to
support growth and the
requirements of a public company
Adj. OPEX%
Adj. GM%
Adj. EBITDA%
We invested in our operating structure to support our future
growth. Revenues in Q1 being lower than expected impacted
profitability.
Q1 Fiscal 2015 Adjusted EBITDA Bridge
19
(millions CAN$)
Adjusted EBITDA decreased
$0.3 million y/y:
Increases in LP Revenues
and LP Adjusted Gross Profit
margin were offset by higher
operating spending to support
our growth.
Key Financials Balance sheet and cash flow overview
20
(millions CAN$)
Strong cash balance and working capital,
with cash reduced by $36 million as a result
of the AlphaLED acquisition and operating
cash consumption in the quarter
As at July 31
2014
As at April 30
2014Change
Cash 51.2 87.1 (35.9)
Working capital 69.2 96.3 (27.1)
Revolving credit facilities - - -
Long term debt1 0.2 0.2 -
Q1 2015 Q1 2014 Change
Operating cash flow before net change in non-cash operating items
(1.7) (1.1) (0.6)
Net change in non-cash operating items (3.6) (2.2) (1.4)
Operating cash flow (5.3) (3.3) (2.0)
Capital expenditures (0.7) (0.9) 0.2
Free cash flow (6.0) (4.2) (1.8)
1 Long term debt is only comprised of financial lease obligations. Includes current portion of long term debt.
Inventory turns impacted by
supply chain issues
21
Cash Flow Cycle Elements
Cash consumption tied to:
- W/C increase of $3.6M (including bonus of $1.6M)
- Negative EBITDA of $1.9M (including $0.8M acquisition costs)
Higher DSO due to the acquisition of AlphaLED
and longer payment terms negotiated on certain
international projects
Capital spending in Q1 in-line
with our plan
Going Forward
22 22
Pursue integration of AlphaLED
Resolve remaining supply chain issues
and mitigate ongoing risks
Evaluate potential acquisitions that fit with
our acquisition strategy
Continue to outperform industry growth
Goal remains to reach Adjusted Gross
Profit margins close to 50%, and to reach
Adjusted EBITDA margins of approximately
18% to 20% within the next five years
There’s more online Lumenpulse.com
Questions? Investor Relations
1-877-937-3003
23
Thank you
Appendix
25
Non-IFRS Measures
This presentation makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under
IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures
presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures
by providing further understanding of our results of operations from management’s perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
We use non-IFRS measures including EBITDA, Adjusted EBITDA, Adjusted Net Loss, Adjusted Gross Profit, Adjusted Operating
Expenses, Adjusted Selling and Marketing Expenses, Adjusted Research and Development Expenses and Adjusted General and
Administrative Expenses to provide investors with supplemental measures of our operating performance and thus highlight trends in
our core business that may not otherwise be apparent when relying solely on IFRS financial measures. EBITDA is defined as earnings
before interest and other financing costs, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA less
unusual and non-recurring items and non-cash share-based compensation. Unusual and non-recurring items is defined as expenses
incurred for the initial public offering and acquisition related costs. Adjusted Net Loss is defined as net loss before net change in
carrying value of the redeemable shares at the option of the holders and related financial derivative liability, early repayment fee on
long-term debt, unusual and non-recurring items net of taxes, non-cash share-based compensation. Adjusted Gross Profit is defined
as gross profit before non-cash share-based compensation and depreciation and amortization. Adjusted Operating Expenses is
defined as operating expenses less non-cash share-based compensation, depreciation and amortization and unusual and non-
recurring items. Adjusted Selling and Marketing Expenses is defined as selling and marketing expenses less non-cash share-based
compensation, depreciation and amortization. Adjusted Research and Development Expenses is defined as research and
development expenses less non-cash share-based compensation, depreciation and amortization. Adjusted General and Administrative
Expenses is defined as general and administrative expenses less non-cash share-based compensation, depreciation and amortization
and unusual and non-recurring items.
For a reconciliation of net loss to EBITDA, Adjusted EBITDA and Adjusted Net Loss, a reconciliation of gross profit to Adjusted Gross
Profit, a reconciliation of operating expenses to Adjusted Operating Expenses, a reconciliation of selling and marketing expenses to
Adjusted Selling and Marketing Expenses, a reconciliation of research and development expenses to Adjusted Research and
Development Expenses and a reconciliation of general and administrative expenses to Adjusted General and Administrative
Expenses, see section 3.2.1 “Reconciliation of Non-IFRS Measures” in the Company's Management's Discussion & Analysis for Q1
2015 filed with the Canadian securities regulatory authorities, which is available on the SEDAR website at www.sedar.com.
