H2O Innovation Inc Debt surged on 81.1% and Revenue jumped on 13.3%
24.09.2020 • About H2O Innovation Inc (
$HEO) • By InTwits
H2O Innovation Inc reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- H2O Innovation Inc is a fast growth stock: FY2020 revenue growth was 13.3%, 5 year revenue CAGR was 22.4% at FY2020 ROIC -3.2%
- EBITDA Margin is quite volatile: 3.4% in FY2020, 5.5% in FY2019, 3.4% in FY2018, 1.4% in FY2017, 6.5% in FY2016
- H2O Innovation Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's in pair with industry average of 5.6%
- CAPEX is quite volatile: 2 CADm in FY2020, 7 CADm in FY2019, 1 CADm in FY2018, 15 CADm in FY2017, 36 CADm in FY2016
- The company has unprofitable business model: ROIC is -3.2%
- It operates with high leverage: Net Debt/EBITDA is 4.3x while industry average is 2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
H2O Innovation Inc's Revenue surged on 13.3%. Revenue growth showed small slowdown in FY20Q4 - it was 12.8% YoY. During FY2016-FY2020 Revenue growth topped in FY2017 at 63.3% and was decelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 2.1 pp from 5.5% to 3.4% in FY2020.
Gross Margin increased on 3.9 pp from 23.0% to 26.9% in FY2020. During the last 5 years Gross Margin bottomed in FY2018 at 22.2% and was growing since that time. SG&A as a % of Revenue increased slightly on 0.55 pp from 12.5% to 13.0% in FY2020. SG&A as a % of Revenue declined at -2.5 pp per annum in FY2016-FY2020.
Net Income margin decreased slightly on 1.3 pp from -1.8% to -3.2% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.68% in FY2020. The company showed small CAPEX/Revenue decline of 0.94 pp from 1.6% in FY2017 to 0.68% in FY2020. It's average level of CAPEX/Revenue for the last three years was 1.4%.
Return on investment
The company operates at negative ROIC (-3.2%) and ROE (-7.1%). ROIC decreased on 5.0 pp from 1.8% to -3.2% in FY2020. ROE decreased on 2.3 pp from -4.7% to -7.1% in FY2020.
Leverage (Debt)
Debt level is 4.3x Net Debt / EBITDA and 6.4x Debt / EBITDA. Net Debt / EBITDA jumped on 2.8x from 1.5x to 4.3x in FY2020. Debt jumped on 81.1% while cash jumped on 51.7%.
H2O Innovation Inc has no short term refinancing risk: cash is higher than short term debt (124.5%).
Financial and operational results
FY ended 30.06.2020
H2O Innovation Inc ($HEO) key annual financial indicators| mln. CAD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 50.7 | 82.8 | 99.7 | 118.0 | 133.6 | 13.3% |
| Gross Profit | 15.5 | 19.2 | 22.1 | 27.1 | 35.9 | 32.4% |
| SG&A | 11.2 | 16.3 | 14.6 | 14.7 | 17.4 | 18.3% |
| EBITDA | 3.3 | 1.1 | 3.4 | 6.4 | 4.5 | -29.7% |
| Net Income | 0.2 | -5.1 | -3.4 | -2.2 | -4.2 | |
Balance Sheet
|
|---|
| Cash | 3.1 | 3.9 | 2.0 | 6.2 | 9.4 | 51.7% |
| Short Term Debt | 7.2 | 7.3 | 11.7 | 9.4 | 7.6 | -19.6% |
| Long Term Debt | 2.1 | 9.1 | 7.8 | 6.6 | 21.4 | 225.2% |
Cash flow
|
|---|
| Capex | 1.1 | 1.3 | 1.7 | 2.1 | 0.9 | -56.9% |
Ratios
|
|---|
| Revenue growth | 4.0% | 63.3% | 20.4% | 18.4% | 13.3% | |
| EBITDA growth | 28.5% | -65.7% | 201.8% | 89.8% | -29.7% | |
|
|---|
| Gross Margin | 30.7% | 23.1% | 22.2% | 23.0% | 26.9% | 3.9% |
| EBITDA Margin | 6.5% | 1.4% | 3.4% | 5.5% | 3.4% | -2.1% |
| SG&A, % of revenue | 22.0% | 19.7% | 14.6% | 12.5% | 13.0% | 0.6% |
| Net Income Margin | 0.4% | -6.2% | -3.5% | -1.8% | -3.2% | -1.3% |
| CAPEX, % of revenue | 2.2% | 1.6% | 1.7% | 1.8% | 0.7% | -1.1% |
|
|---|
| ROIC | 5.3% | -7.6% | -1.0% | 1.8% | -3.2% | -5.0% |
| ROE | 0.8% | -14.7% | -8.2% | -4.7% | -7.1% | -2.3% |
| Net Debt/EBITDA | 1.9x | 11.2x | 5.2x | 1.5x | 4.3x | 2.8x |
H2O Innovation Inc ($HEO) key quoterly financial indicators
| mln. CAD | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 28 | 33 | 36 | 36 | | 15.8% | 13.5% | 11.6% | 12.8% |
| EBITDA | 1 | 1 | -1 | 4 | | -2.7% | 22.3% | -172.9% | 51.3% |
| Net Income | -1 | -1 | -3 | 1 | | - | - | -682.1% | - |
Balance Sheet
|
|---|
| Cash | 7 | 6 | 7 | 9 | | 278.4% | 8.4% | 16.7% | 51.7% |
| Short Term Debt | 10 | 11 | 11 | 8 | | -14.6% | 3.7% | 3.1% | -19.6% |
| Long Term Debt | 13 | 22 | 23 | 21 | | 77.4% | 234.5% | 261.2% | 225.2% |
Ratios
|
|---|
| Gross Margin | 23.8% | 24.8% | 28.7% | 29.4% | | 1.2% | 3.6% | 5.3% | 4.9% |
| EBITDA Margin | 3.8% | 3.3% | -3.9% | 10.5% | | -0.7% | 0.2% | -9.9% | 2.7% |
| Net Income Margin | -3.7% | -2.7% | -8.6% | 2.3% | | -2.3% | 1.4% | -10.2% | 5.9% |
Peers in Industrial
Below you can find H2O Innovation Inc benchmarking vs. other companies in Industrial industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Radient Technologies Inc ($RTI) | - | -53.2% | 55.3% | -53.0% | 8,497.8% |
| Thermal Energy International Inc ($TMG) | - | 6.4% | 32.0% | 21.1% | 1.6% |
| Cielo Waste Solutions Corp ($CMC) | - | - | - | - | 0.0% |
| |
|---|
| Median (3 companies) | 2.9% | -23.4% | 43.6% | -16.0% | 1.6% |
|---|
| H2O Innovation Inc ($HEO) | - | 63.3% | 20.4% | 18.4% | 13.3% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Thermal Energy International Inc ($TMG) | 54.8% | 56.4% | 47.9% | 43.8% | 41.8% |
| Radient Technologies Inc ($RTI) | 45.7% | 39.0% | 42.8% | 38.7% | 2.4% |
| Cielo Waste Solutions Corp ($CMC) | - | - | - | 0.0% | 0.0% |
| |
|---|
| Median (3 companies) | 22.9% | 47.7% | 45.3% | 38.7% | 2.4% |
|---|
| H2O Innovation Inc ($HEO) | 30.7% | 23.1% | 22.2% | 23.0% | 26.9% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Clean Seed Capital Group Ltd ($CSX) | -103.4% | - | - | - | 70.0% |
| Thermal Energy International Inc ($TMG) | 3.0% | 4.7% | 3.1% | 0.3% | -6.5% |
| Radient Technologies Inc ($RTI) | -573.5% | -1,328.0% | -1,614.1% | -7,992.3% | -119.7% |
| Cielo Waste Solutions Corp ($CMC) | - | - | - | -75,804.5% | -142,513.9% |
| |
|---|
| Median (4 companies) | 10.1% | -661.7% | -805.5% | -7,992.3% | -63.1% |
|---|
| H2O Innovation Inc ($HEO) | 6.5% | 1.4% | 3.4% | 5.5% | 3.4% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cielo Waste Solutions Corp ($CMC) | - | - | - | 212,333.1% | 169,789.6% |
| Radient Technologies Inc ($RTI) | 2.7% | 2.2% | 274.8% | 5,744.2% | 60.1% |
| Thermal Energy International Inc ($TMG) | 0.5% | 0.3% | 0.3% | 0.3% | 1.3% |
| Clean Seed Capital Group Ltd ($CSX) | 12.1% | - | - | - | 0.5% |
| |
|---|
| Median (4 companies) | 3.9% | 1.2% | 137.6% | 5,744.2% | 30.7% |
|---|
| H2O Innovation Inc ($HEO) | 2.2% | 1.6% | 1.7% | 1.8% | 0.7% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Clean Seed Capital Group Ltd ($CSX) | -17.2% | -24.3% | -78.1% | -50.5% | 28.0% |
| Thermal Energy International Inc ($TMG) | 11.2% | 17.0% | 12.7% | -4.9% | -29.8% |
| Cielo Waste Solutions Corp ($CMC) | - | -34.7% | -73.9% | -41.6% | -43.3% |
| Radient Technologies Inc ($RTI) | - | -402.1% | -45.9% | -43.0% | -53.0% |
| Organic Potash Corp ($OPC) | - | - | - | - | - |
| |
|---|
| Median (5 companies) | 9.0% | -29.5% | -59.9% | -42.3% | -36.6% |
|---|
| H2O Innovation Inc ($HEO) | 5.3% | -7.6% | -1.0% | 1.8% | -3.2% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Clean Seed Capital Group Ltd ($CSX) | - | - | - | - | -0.1x |
| |
|---|
| Median (1 company) | 1.7x | -4.8x | -2.9x | -19.3x | -0.1x |
|---|
| H2O Innovation Inc ($HEO) | 1.9x | 11.2x | 5.2x | 1.5x | 4.3x |
