H2O Innovation reports fiscal year 2013 second quarter results - Revenues increase 33.5%, Company records net earnings

H2O Innovation reports fiscal year 2013 second quarter results - Revenues 
increase 33.5%, Company records net earnings 
TSX-V: HEO
Alternext: MNEMO: ALHEO 
Results for the three-month period ended December 31, 2012 


    --  Revenues of $9.4 million, up by 33.5% from $7.1 million for the
        same period in fiscal year 2012.
    --  Gross profit up at 26.1%, compared to 22.6% for the same period
        in fiscal year 2012.
    --  Adjusted EBITDA(1) at $561,888, compared to ($404,906) for the
        same period in fiscal year 2012.
    --  Operating, selling and administrative expenses down by
        $157,000, at 20.1% of revenues, compared to 29.1% for the same
        period in fiscal year 2012.
    --  Net earnings of $488,854, up compared to a net loss of
        ($1,214,510) for the same period in fiscal year 2012.
    --  Operating activities generated $1,024,161 in net cash, compared
        to ($1,408,003) used for the same period in fiscal year 2012.

Results for the six-month period ended December 31, 2012
    --  Revenues of $19.4 million, up by 37.3% from $14.1 million for
        the same six-month period in fiscal year 2012.
    --  Gross profit up at 25.4%, compared to 23.6% for the same
        six-month period in fiscal year 2012.
    --  Adjusted EBITDA at $1,288,581, compared to ($72,098) for the
        same six-month period in fiscal year 2012.
    --  Operating, selling and administrative expenses down by
        $140,000, at 19.3% of revenues, compared to 27.5% for the same
        six-month period in fiscal year 2012.
    --  Net earnings of $758,550, up compared to a net loss of
        ($1,302,726) for the same six-month period in fiscal year 2012.
    --  Operating activities generated $2,234,375 in net cash, compared
        to ($325,470) used for the same six-month period in fiscal year
        2012.

All amounts in Canadian dollars unless otherwise stated.

QUEBEC CITY, Feb. 13, 2013 /CNW Telbec/ - (TSXV: HEO) - H(2)OInnovation Inc. 
("H(2)OInnovation" or the "Company") announces its results for the second 
quarter of fiscal year 2013 ended on December 31, 2012. During this quarter, 
the Company's revenues increased by 33.5% to $9.4 M, up from $7.1 M in the 
comparable quarter of the previous fiscal year - generating a solid gross 
profit of 26.1% compared to 22.1% in the second quarter of fiscal year 2012. 
"This is a significant improvement from the gross profit generated in the last 
two quarters. This performance is partly attributable to various factors such 
as the rise in our business volume and the changes we have initiated and 
implemented since June 30, 2012 meant to enhance our operations and increase 
our gross profit. Many challenges remain as we continue to seek operational 
excellence in project execution", stated Frédéric Dugré, President and 
Chief Executive Officer of H(2)OInnovation.

The Company's revenues for the second quarter of fiscal year 2013 totaled $9.4 
M, representing a $2.3 M or 33.5% increase, as compared with revenues of $7.1 
M for the same quarter of fiscal year 2012. The increase is largely 
attributable to revenues from water treatment projects which reached $6.0 M 
compared to $4.0 M in the corresponding period of the previous fiscal year, 
representing a 47.7% increase. Nearly half of these $6.0M revenues come from 
the oil & gas sector in Western Canada and 25% from the municipal sector in 
the United States. This is a direct consequence of the materialisation of the 
Company's order backlog which stood at $18.7M as at December 31, 2012. 
Revenues from sales of specialty chemicals and consumables increased by $0.4 M 
for this quarter, reaching $3.4 M compared with $3.0 M in the comparable 
quarter in fiscal year 2012, showing a steady growth.

The Company generated net earnings of $488,854 or $0.008 per share compared to 
a net loss of ($1,214,510) or ($0.020 per share) for the same period in fiscal 
year 2012. This improvement is attributable to four main factors. First, the 
Company recorded a high level of revenues. Second, management has applied a 
tight control on project execution, notably for procurement, and on hours 
spent on projects. Third, management closely monitors the SG&A and is diligent 
in finding additional savings. Finally, the Company recorded a gain on 
settlement agreement related to the Company's wastewater activities. "Over the 
last two quarters we have made an important restructuration in our wastewater 
activities, both on the technical and commercial sides. We believe this will 
springboard the growth momentum in this sector as we are consolidating our 
sales rep network", added Frédéric Dugré.
                                                                       

CONSOLIDATED RESULTS      Three-month period           Six-month period
Selected financial     ended on December 31,      ended on December 31,
data                             (Unaudited)                (Unaudited)
                          2012          2011         2012          2011
                             $             $            $             $

Revenues             9,418,908     7,056,495   19,401,802    14,126,263

Gross profit         2,461,061     1,592,624    4,923,632     3,337,558

Gross profit             26.1%         22.6%        25.4%         23.6%

Operating expenses     139,369       181,538      275,141       286,644

Selling expenses       904,630       954,006    1,747,784     1,818,673

Administrative
expenses               853,853       919,647    1,717,116     1,774,739

Net earnings (loss)    488,854   (1,214,510)      758,550   (1,302,726)

Basic and diluted
earnings (loss) per
share                    0.008       (0.020)        0.013       (0.022)

Adjusted EBITDA        561,888     (404,906)    1,288,581      (72,098)

(_________________________________________)

(1) The definition of adjusted earnings before interest, tax
depreciation and amortization (adjusted EBITDA) does not take into
account the Company's changes in fair value of contingent
considerations, impairment of intangible assets, impairment of
goodwill, stock-based compensation costs, gain on settlement agreement,
and share of (earnings) loss in a joint venture. The definition of
adjusted EBITDA used by the Company may differ from those used by other
companies.

During the quarter, the Company added $4.3 M in new bookings for water 
treatment projects. These new bookings, coupled with the level of revenues 
realized from systems projects during the quarter, have brought down the 
backlog at $18.7 M as at December 31, 2012. Management remains confident to 
grow the Company's sales backlog again above the $20M mark as its sales 
pipeline is rich with multiple opportunities in its targeted markets. In the 
coming months, the Company will focus on increasing its footprint in North 
America for water and wastewater treatment projects.

The Company's ratio of selling, operating and administrative expenses ("SG&A") 
as a whole over revenues amounted to 20.1% for this quarter, down from 29.1% 
for the corresponding quarter of the previous fiscal year. This decrease is 
partially attributable to the increase in volume of business and reflects the 
Company's efforts to reach profitability and maximize the use of its internal 
resources, showing the benefit and scalability of its business model. Overall, 
the Company's SG&A expenses show a decrease of approximately $160,000 compared 
to the corresponding quarter of fiscal year 2012 and remain in line with the 
Company's fiscal year 2013 budget.

Adjusted EBITDA for the quarter was recorded at $561,888, compared with 
($404,906) for the same period ended December 31, 2011. The higher revenues 
recorded during the quarter compared with the corresponding quarter of the 
previous fiscal year, combined with the significant gross profit improvement 
from 22.6% to 26.1% and the somewhat stable SG&A expenses also contributed to 
generating positive adjusted EBITDA.

Operating activities generated $1,024,161 in cash for the period ended 
December 31, 2012, compared with ($1,408,003) of cash used during the 
corresponding period ended December 31, 2011. The rise is mainly attributable 
to the significant improvement in net earnings in the second quarter of fiscal 
year 2013 as compared with the corresponding period ended December 31, 2011 
and to the positive change in working capital items.

Over the six-month period ended December 31, 2012, the Company's revenues 
totaled $19.4M, compared to $14.1M for the corresponding period ended 
December 31, 2011, showing an increase of 37.3%. During this same period the 
Company recorded net earnings amounting to $758,550 and a positive adjusted 
EBITDA of $1,288,581, compared to a net loss of ($1,302,726) and a negative 
adjusted EBITDA of ($72,098) for the corresponding period of fiscal year 2012. 
For the six-month period ended December 31, 2012, the Company generated 
$2,234,375 of cash flows from its operating activities, compared to ($325,470) 
used by its operating activities for the corresponding period of fiscal year 
2012.

The second quarter financial report is available on www.h2oinnovation.com and 
on NYSE Euronext Alternext's site. Additional information on the Company is 
also available on SEDAR (www.sedar.com).

Prospective disclosures
Certain statements set forth in this press release regarding the operations 
and the activities of H(2)OInnovation as well as other communications by the 
Company to the public that describe more generally management objectives, 
projections, estimates, expectations or forecasts may constitute 
forward-looking statements within the meaning of securities legislation. 
Forward-looking statements concern analysis and other information based on 
forecast future results and the estimate of amounts that cannot yet be 
determined. Forward-looking statements include the use of words such as 
"anticipate", "if", "believe", "continue", "could", "estimate", "expect", 
"intend", "may", "plan", "potential", "predict", "project", "should" or 
"will", and other similar expressions, as well as those usually used in the 
future and the conditional, notably regarding certain assumptions as to the 
success of a venture. Those forward-looking statements involve a number of 
risks and uncertainties, which may result in actual and future results of the 
Company to be materially different than those indicated. Information about the 
risk factors to which the Company is exposed is provided in the Annual 
Information Form dated September25, 2012 available on SEDAR (www.sedar.com). 
Unless required to do so pursuant to applicable securities legislation, 
H(2)OInnovation assumes no obligation to update or revise forward-looking 
statements contained in this press release or in other communications as a 
result of new information, future events and other changes.

About H(2)OInnovation
H(2)O Innovation designs and provides state-of-the-art, custom-built, and 
integrated water treatment solutions based on membrane filtration technology 
to municipal, energy & natural resources end-users. H(2)O Innovation also 
provides a complete line of specialty chemicals and consumables for membrane 
filtration and reverse osmosis systems. For more, visit www.h2oinnovation.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that 
term is defined in the policies of the TSX Venture Exchange) nor the Alternext 
Exchange accepts responsibility for the adequacy or accuracy of this release.

Source: H2O Innovation Inc. www.h2oinnovation.com

Contact: Marc Blanchet +1418-688-0170 marc.blanchet@h2oinnovation.com

SOURCE: H2O INNOVATION INC.

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CO: H2O INNOVATION INC.
ST: Quebec
NI: ENV ERN 

-0- Feb/13/2013 13:00 GMT