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Clear Blue Technologies International Inc
Symbol CBLU
Shares Issued 34,850,353
Close 2020-04-29 C$ 0.19
Recent Sedar Documents

Clear Blue loses $5.1-million in 2019

2020-04-29 21:36 ET - News Release

Ms. Miriam Tuerk reports

CLEAR BLUE TECHNOLOGIES INTERNATIONAL ANNOUNCES 2019 FINANCIAL RESULTS

Clear Blue Technologies International Inc. has released its financial results for the year ended Dec. 31, 2019.

Key financial results:

  • Record quarterly revenues of $2,392,839 in fourth quarter, a 114-per-cent increase over fourth quarter 2018;
  • Trailing-four-quarter (TFQ) revenue of $3,971,301, a 5-per-cent increase over 2018;
  • TFQ gross margin percentage decreased from 24.8 per cent to 22.4 per cent, a reduction resulting from a new allocation, beginning in 2019, as a result of the company's scale, to record direct service cost expenses to gross margin; without this, TFQ gross increased to 25.3 per cent;
  • Fourth quarter gross margin percentage of 16.5 per cent, compared with 19.6 per cent in fourth quarter 2018;
  • TFQ adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was ($4,157,128) versus ($4,565,513) in 2018;
  • The company exceeded its previous guidance on telecom pilots by selling 12 proof of concepts and five first installs in 2019.

Subsequent events

The period following the quarter ended on Dec. 31, 2019, was notable for the company with the following outcomes:

  • On April 16, 2020, the company announced the signing of a large rollout project with an initial purchase order for 50 units of a planned multiyear 500-unit sale. The contract has the potential to lead to an estimated $3.5-million in sales in the fiscal year 2020.
  • On April 14, 2020, the company arranged additional liquidity through a $5-million loan from BDC Capital Inc. The company received the first $2-million tranche with an additional $3-million available upon meeting certain financial milestones.

Chief executive officer remarks

The fiscal year 2019 was a year that had some great successes, albeit tempered by slow results impacting the bottom line. The first three quarters were slow, and while the company had a great fourth quarter, it did not fully offset its lower results from first quarter through third quarter. As a result, the revenue growth in 2019 over 2018 was relatively flat, with a 5-per-cent growth year over year.

The company's position in the market strengthened substantially, and its investments in the African and telecommunications market yielded great success with the company exceeding its guidance on the number of pilots and first install projects. As these projects mature into large-scale rollouts, significant contracts with long-term multiyear sustainable growth are on the horizon. While COVID-19 will impact its business, the company believes that it is a small delay and that telecommunications infrastructure will be a key area of investment and growth post-COVID-19. Subsequent to the quarter, Clear Blue announced its first large contract rollout, and it sees potential for additional contracts in 2020.

Revenue and gross margin

Revenue in the quarter increased by 114 per cent to $2,392,839. Full-year revenues were $3,971,301, an increase of 5 per cent over 2018. Telecom sales posted a 438-per-cent revenue increase to $928,287 for the TFQ ended Dec. 31, 2019. This illustrates the company's traction in the telecom sector as projects moved from small proofs of concept to initial install system deployments. Two thousand nineteen gross profit was $891,163, a decrease from 24.8 per cent to 22.4 per cent over 2018.

Telecom sector adoption and progress

During fourth quarter, Clear Blue exceeded its previous guidance on telecom sector adoption, bringing the total at the end of 2019 to 12 proofs of concept and five first installs.

After year-end, in April, 2020, the company announced it had won a large rollout contract. Taking into consideration the company's caution regarding forward-looking statements, the company sees the potential for one or more additional first installs transitioning to significant rollout deals in 2020 depending on the success of its bid partners.

Clear Blue service adoption and recurring revenue

In 2019, Clear Blue deployed 1,478 units for a total of 5,018 units to date. Today, Clear Blue has the most extensive data collection of production systems in the world, with 3.2 million operating days of site production data, allowing it to build ever smarter and higher performing products and services.

Clear Blue's balance sheet item showing the amount of sold and paid-for-service revenue that it will recognize over time increased by 77 per cent to $514,608. This growth was primarily driven by the company's launch of energy as a service in second quarter 2019.

Operating expenses

Operating expenses decreased by $95,177 or 2 per cent for the TFQ ended Dec. 31, 2019, compared with the same period in 2018. This included an increase in bad debt provision to anticipate potential effects caused by COVID-19, non-cash stocked-based compensation and reduced SRED (scientific research and experimental development) tax amounts as public companies do not get the same amounts as private companies (the company was private for part of 2018, and thus this amount was higher). Net of these items, operating expenses have declined year over year.

Net loss and comprehensive loss

Clear Blue is a high-tech company, and research and development investments are substantial parts of the company's costs. This investment will enable Clear Blue to emerge as the market leader in a new and exciting global market. For the TFQ ended Dec. 31, 2019, the company reported a net loss of ($5,101,918), a decrease of $2,996,649 or 37 per cent over 2018.

Fiscal year 2019 non-international financial reporting standard adjusted EBITDA

Beginning in the fiscal year 2019, Clear Blue began reporting non-IFRS adjusted EBITDA. For 2019, adjusted EBITDA was ($4,157,728), a 9-per-cent improvement over 2018.

Outlook

Clear Blue competes in a marketplace, where competitors focus on large, on-grid systems and one-time sales of hardware products. Clear Blue focuses on the wireless off-grid market. The company's business model is to provide energy as a service (EaaS), a continuing delivery model, where customers receive long-term assurance of reliable power, and the company is paid additional revenue over time for that reliability. As a result, Clear Blue holds the first-mover advantage and leads the market, as evidenced by the deployment of its systems in 37 countries.

In 2019, the company undertook several new product initiatives, driven by significant technology innovations, which should allow for a material improvement in gross margin in 2020.

Lighting sales continued to provide a stable base of revenues and gross margin during 2019 while the telecom market for the company's product matured. High-margin EaaS sales did well following launch in May, 2019. The company believes EaaS revenues will continue to grow as a percentage of revenues in 2020.

By the end of 2019, the company had deployed 5,018 systems in 37 countries, primarily in North America, Africa and the Middle East. It has generated approximately 3.2 million days of operating history.

Like all international businesses, Clear Blue sees some impact from the COVID-19 pandemic. It has experienced a backlog in orders with suppliers, and there are longer lead times than seen pre-COVID-19. Additionally, transportation networks are being impacted by the push to prioritize the shipment of critical medical equipment. The company has benefited from the large inventory of essential components it conservatively carried through 2019 and intends to manage supply chain risk through inventory, long-lead-time planning and multivendor sourcing in 2020. It believes that communications infrastructure is going to be a critical component of COVID-19 mitigation and anticipates telecom projects will continue to proceed in all regions on this basis, but perhaps with some COVID-19-related delays. As reported on April 20, 2020, the company has secured a $5-million credit facility from BDC to provide additional liquidity. The supply chain will continue to be a risk, and management is actively working on mitigation strategies to ensure any impact is minimal.

For guidance, the company has previously provided forecasts of telecom proof of concept, first installs and rollout orders as a measure of future opportunity. While these activities are continuing to progress, the speed and pace of these initiatives may be affected by COVID-19-related shutdowns. Given the COVID-19 pandemic, the company cannot provide an estimate of similar projects for 2020 at this time although it has already received orders for one new proof of concept and one first install in 2020.

From a long-term perspective, management believes its market potential remains very strong. The company has a strong sales funnel, and the company has experienced continued customer interest throughout this period.

Conference call

The company will host a conference call to discuss its latest financial results at 11 a.m. Eastern Time (Canada and the United States) on April 30, 2020.

About Clear Blue Technologies International Inc.

Clear Blue Technologies International, the smart off-grid company, was founded on a vision of delivering clean, managed, wireless power to meet the global need for reliable, low-cost, solar and hybrid power for lighting, telecom, security, Internet of things devices, and other mission-critical systems. Today, Clear Blue has thousands of systems under management across 37 countries, including the U.S. and Canada.

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