IBI Group Inc. Announces Third Quarter 2018 Financial Results

• Net revenue increased 2.4% to $92 million over the comparable quarter in 2017.
• Adjusted EBITDA for the quarter was 11% of revenue.
• In the quarter, the Company amended its credit facilities and redeemed the remaining balance of the 7% Convertible Debentures for $14.8 million.
• Reduced overall debt by $6.1 million in the quarter.
• Company launched BlueIQ to help water utilities reduce operating costs and conserve energy.

Toronto, ON /November 8, 2018/ – IBI Group Inc. (the “Company”) (TSX:IBG) today announced financial results for the three and nine months ended September 30, 2018.

KEY EVENTS

• Net revenue for the quarter was $92.0 million, compared to $89.8 million for the same period in 2017.
• Adjusted EBITDA was $10.2 million (or 11.0% of revenue) for the quarter, compared to $11.1 million (or 12.3% of revenue) for the same period in 2017.
• Adjusted EBITDA for the U.S. operating region was $0.3 million this quarter, compared to losses of $2.0 million in the second quarter and $0.9 million in the first quarter of 2018. The improvement this quarter is a direct result of restructuring, cost saving initiatives and increased backlog of 3 months within the region compared to Q1 2018, as a result of significant contracts in the U.S. Buildings operations.
• Cash flows provided by operating activities for the quarter increased to $12.8 million, compared to $11.2 million for the same period in 2017.
• The Company entered into an amended agreement on its credit facilities with its lenders to extend the maturity date, increase the maximum available amount on the swing line facility and improve on interest rate margins.
• On September 27, 2018, the Company redeemed the remaining balance of the 7% Convertible Debentures under Option A for $14.8 million cash, financed from the credit facilities.
• The Company reduced overall debt by $6.1 million in the quarter.
• Subsequent to quarter end, the Company launched BlueIQ by IBI Group, a real-time energy management solution for urban water distribution as a further step in executing its technology pivot.

“EBITDA margins and revenue have improved this quarter as a result of significant improvements in our U.S. Buildings and Infrastructure practices, following two consecutive quarters of losses. Management remains committed to growing the U.S. business, improving operations and financial results further. During the quarter, the Company amended its credit facilities and used the financing to redeem the remaining balance of the 7% Convertible Debentures for $14.8 million. On October 4, we launched BlueIQ, an innovative software solution that assists with the control of water pumps and valves. BlueIQ has already proven to reduce system-wide energy costs, with an associated reduction in greenhouse gas emissions. We continue to work with cities and communities around the world to support the adoption of smarter and more efficient infrastructure, we see the launch of BlueIQ as an important next step in the firm’s technology-driven future,” said Scott Stewart, Chief Executive Officer of IBI Group Inc.

FINANCIAL HIGHLIGHTS

¹See “Definition of Non-IFRS Measures” defined in MD&A.

FINANCIAL OVERVIEW

The Company had net income of $8.0 million this quarter, compared to $5.5 million in the same period in 2017. Net income this quarter was inclusive of a pre-tax gain in fair value of other financial liabilities of $4.7 million, compared to a loss of $1.5 million in the same period in 2017 as a result in changing market conditions. It was also inclusive of a loss in foreign exchange of $0.6 million, compared to a gain of $2.3 million for the same period in 2017 as a result of the movement in the market value of the Canadian Dollar. The Company had net income of $16.8 million for the nine months ended September 30, 2018, compared to $14.3 million in the same period in 2017.

Basic and diluted earnings per share was $0.21 per share for the quarter, compared to $0.15 per share for the same period in 2017. The increase was primarily due to an increase in net income of $2.5 million offset slightly due to an increase in the weighted average number of common shares outstanding, 31,220,877 as of quarter end, compared to 31,190,153 for the same period in 2017. The increase in common shares outstanding is a result of the exercise of deferred share units and stock options. Basic and diluted earnings per share was $0.45 and $0.44 per share for the nine months ended September 30, 2018 respectively compared to $0.38 per share for the same period in 2017. Basic and diluted earnings per share increased primarily due to an increase in net income of $2.5 million offset slightly due to an increase in the weighted average number of common shares outstanding. The increase in common shares outstanding is a result of the exercise of deferred share units and stock options.

Adjusted EBITDA was $10.2 million (or 11.0% of revenue) this quarter, compared to $11.1 million (or 12.3% of revenue) for the same period in 2017. During the quarter, adjusted EBITDA was impacted by the increase in cash outflows related to the onerous lease of $0.3 million, compared to the same period in 2017. For the nine months ended September 30, 2018 adjusted EBITDA was $28.4 million (or 10.3% of revenue) compared to $33.0 million (or 12.0% of revenue) for the same period in 2017. During the nine months ended September 30, 2018, adjusted EBITDA was impacted by the increase in cash outflows related to the onerous lease of $1.8 million, compared to the same period of 2017. This is a result of the Company finalizing its sub-lease agreement for one of its office spaces in 2017, at which point, an increase in rent expense was recognized as part of net earnings, but not included in adjusted EBITDA in 2017. The cash outflows related to the onerous lease have the opposite effect, with no impact to net earnings but a reduction to adjusted EBITDA for the three and nine months ended September 30, 2018.

Cash flows provided by operating activities increased this quarter to $12.8 million compared to $11.2 million for the same period in 2017, which reflects an increase of $1.6 million. Cash flows provided by operating activities decreased to $11.3 million for the nine months ended September 30, 2018 compared cash flows provided by operating activities of $12.3 million for the same period in 2017.

OUTLOOK

Management continues to forecast approximately $361 million in total net revenue for the year ended December 31, 2018. The Company currently has approximately $372 million of work that is under contract for the next five years. This contracted work translates to approximately 12 months of backlog (calculated on the basis of the current pace of work that the Company has achieved during the 12 months ended September 30, 2018).

INVESTOR CONFERENCE CALL

The Company invites you to join its conference call on Friday, November 9, 2018 at 8:30 a.m. ET. A recording of the conference call will be available on IBI Group’s website within 24 hours following the call. An audio replay of the call will be available until November 23, 2018.

Conference Call Details:

Date: Friday, November 9, 2018
Time: 8:30 a.m. ET
Dial In: North America: 1-800-763-5728
Replay: North America: 1-800-558-5253
Replay Passcode: 21895524

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this news release may constitute “forward-looking” statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and its subsidiary entities, including IBI Group Partnership or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this news release, such statements use words such as “may”, “will”, “expect”, “believe”, “plan” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this news release. These forward- looking statements involve a number of risks and uncertainties, including those related to: (i) the Company’s ability to maintain profitability and manage its growth; (ii) the Company’s reliance on its key professionals; (iii) competition in the industry in which the Company operates; (iv) timely completion by the Company of projects and performance by the Company of its obligations; (v) fixed-price contracts; (vi) the general state of the economy; (vii) risk of future legal proceedings against the Company; (viii) the international operations of the Company; (ix) reduction in the Company’s backlog; (x) fluctuations in interest rates; (xi) fluctuations in currency exchange rates; (xii) upfront risk of time invested in participating in consortia bidding on large projects and projects being contracted through private finance initiatives; (xiii) limits under the Company’s insurance   policies; (xiv) the Company’s reliance on distributions from its subsidiary entities and, as a result, its susceptibility to fluctuations in their performance; (xv) unpredictability and volatility in the price of Shares; (xvi) the degree to which the Company is leveraged and the effect of the restrictive and financial covenants in the Company’s credit facilities; (xvii) the possibility that the Company may issue additional Common Shares diluting existing Shareholders’ interests; (xviii) income tax matters. These risk factors are discussed in detail under the heading “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2018. New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward- looking statements contained in this news release are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as at November 8, 2018.

The factors used to develop revenue forecast in this news release include the total amount of work the Company has signed an agreement with its clients to complete, the timeline in which that work will be completed based on the current pace of work the Company achieved over the last 12 months and expects to achieve over the next 12 months. The Company updates these assumptions at each reporting period and adjusts its forward-looking information as necessary.

About IBI Group Inc.

IBI Group Inc. (TSX:IBG) is a globally integrated architecture, planning, engineering, and technology firm with over 2,500 professionals around the world. For more than 40 years, its dedicated professionals have helped clients create livable, sustainable, and advanced urban environments. IBI Group believes that cities must be designed with intelligent systems, sustainable buildings, efficient infrastructure, and a human touch. IBI Group is a lead partner of the Smart Cities Council North America. Follow us on Twitter @ibigroup and Instagram @ibi_group.

SOURCE: IBI Group Inc.

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