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Boulder, Colorado, Aug. 07, 2019 (GLOBE NEWSWIRE) -- Surna Inc. (SRNA) announced today operating and financial results for the three and six months ended June 30, 2019.

We will be hosting an investor conference call to discuss our Q2 2019 financial results and to provide updates on our recent business developments and our strategic acquisition plan. Prior to the earnings call, we intend to file our Q2 2019 Investor Presentation and a Q2 2019 Fact Sheet with the U.S. Securities and Exchange Commission (“SEC”). The Q2 2019 Investor Presentation and Q2 2019 Fact Sheet will also be available on the Investor Relations section of our website. The call will be held on Tuesday, August 20, 2019 at 4:00 p.m. Eastern Time.

To access the investor call via telephone:
Dial-In Number: 1-973-528-0008
Access Code: 212852

To access the investor call via the Internet:
Webcast URL: https://www.webcaster4.com/Webcast/Page/2020/30890

Interested parties, with contact information supplied, may submit questions to the Company prior to the call to [e-mail]. These questions, along with all live questions, will be answered in the time available.

For those unable to participate in the investor conference call at that time, a replay will be available on the investor relations section of our website at https://surna.com/investor-relations/ beginning on August 21, 2019 at 4:00 p.m. Eastern Time. The replay will be available until November 1, 2019.

Financial Highlights

Surna achieved record operating results in Q2 2019:

? Our Q2 2019 revenue was $4.2 million—a record, and surpassing our previous high quarterly revenue of $3.6 million. Our Q2 2019 revenue represents an increase of 110% compared to Q2 2018 and 138% compared to Q1 2019. During Q2 2019, our revenue reflects $2.4 million recognized from retrofit and expansion project contracts we signed with a single multi-facility operator in the first half of 2019.

? We also achieved a gross profit margin of 34.4% in Q2 2019, our highest gross profit margin since 2016, and an improvement of 6.7 percentage points over our Q1 2019 gross profit margin of 27.7%. This improvement was largely the result of our focus on controlling expenses and better absorption of fixed production costs due to our increased revenue.

? For Q2 2019, we generated net income of $140,000, a quarterly record for us and the first time we have ever achieved positive net income in a quarter. Moreover, we had adjusted operating income of $390,000, a key management metric and point of focus as we attempt to achieve operating cash flow breakeven on a consistent basis from quarter-to-quarter. Our adjusted operating income (loss) is defined as our GAAP operating income (loss) after addback for our non-cash equity compensation expenses and depreciation expense.

? Our cash position increased from $465,000 as of March 31, 2019 to $1,925,000 as of June 30, 2019. Disciplined cash management continues to be a priority for us as we attempt to grow the business without accessing the capital markets with equity offerings at our current stock price.
Tony McDonald, the Company’s CEO stated: “In early 2019, we announced a number of milestones that we hoped to achieve as part of our recently launched organic growth plan. At the top of this list were two financial goals: increasing revenue and achieving profitability. Both of these goals were achieved for Q2 2019—and both milestones are records for the Company. Moreover, during the second quarter, we also increased our cash resources by nearly $1.5 million. One quarter of strong results, however, does not constitute a trend, and we know we must build our sales pipeline with more multi-facility operators and other customers in an effort to sustain our revenue growth and cash profitability.”

Operating Highlights

Although our new organic growth plan is only six months old, we have already made measurable progress on a few different fronts:

? During the first half of 2019, we entered into five $1,000,000+ sales contracts, with an aggregate value of $10.3 million. Three of these contracts, having an aggregate value of $6.5 million, were with a single multi-facility operator for a retrofit project and a two-phase facility expansion. During the first half of 2019, we recognized revenue of $2,627,000 on these three contracts, with the remaining value of these contracts expected to be recognized in Q3 2019.

? We are now offering retrofit consulting work targeting indoor grow facilities that are operating sub-optimally. While we will initially be targeting multi-facility operators that have recently acquired indoor grow facilities that may require facility upgrades, our preliminary market research indicates an even larger retrofit opportunity among the 3,000 – 5,000 indoor grow facilities operated by independent or smaller growers, which industry surveys suggest about 30% are in need of HVAC or lighting improvements.

? We launched our SentryIQTM sensors, controls and automation platform in April 2019 and now offer a turnkey, single-vendor HVAC equipment and controls integration solution to our new build projects. We are also offering our HVAC controls systems to existing facilities in the startup and operation phases. To date, we have signed three contracts for SentryIQTM control systems sales with an aggregate contract value of approximately $225,000.

? In June 2019, we delivered our first custom-designed ducted air handling system, which is now offered as an alternative to our new and improved ductless fan coil units. Our ability to offer larger capacity air handling systems should provide greater opportunities for us to work with multi-facility operators. During the second quarter of 2019, revenue from our custom-designed ducted air handling systems totaled $1.1 million, or 27% of our total revenue for the quarter.
Commercial-Scale Projects

During the first half of 2019, we entered into new contracts for commercial-scale projects with a total value of $12.6 million, which consisted of $6.0 million for new build projects (48%), $5.4 million for expansion projects (42%), and $1.2 million for retrofit projects (10%). As part of our new strategy, we are pursuing expansion and retrofit projects which tend to have more predictable completion schedules. Future bookings for expansion projects will be largely tied to our success in penetrating the multi-facility operator market.

Our recent success in obtaining business from multi-facility operators has also resulted in an increase in the average contract value for our commercial-scale projects. During Q2 2019, the average contract value for our commercial-scale project bookings rose to $1,020,000, compared to $904,000 in Q1 2019, $408,000 for 2018, and $332,000 for 2017.

Bookings and Backlog

During Q2 2019, we executed new sales contracts with a total contract value of $8,522,000. During this same period, we cancelled eight outstanding sales contracts with a total contract value of $3,040,000. These cancellations included combined contract orders of $1,761,000 that we booked in early 2018 with a multi-facility operator that had put two projects on hold in states where the current market conditions, including wholesale cannabis prices, were not favorable. The other cancellations were based on discussions and negotiations with customers who had abandoned their projects. After adjustments for these cancellations and other change orders, our net bookings (as defined below) in Q2 2019 were $5,690,000, another quarterly record for us, representing an increase of $905,000 (or 19%) from net bookings of $4,785,000 in Q1 2019.

Going forward, we will be focused on gaining a better understanding, during the sales process, of our customers’ challenges and key milestones to get their new build projects licensed, financed and built. We are also in the process of revising our sales contract terms to clarify project timelines and options available to us if the customer is unable to perform in a timely manner. While cancellations will always be part of our business, we believe we should be able to identify and evaluate possible project delays and better manage outcomes with our customers, including re-pricing the contract and/or adjusting delivery requirements. We also seek to avoid larger cancellations by contracting with well-financed, multi-facility operators and/or pursuing expansion or retrofit projects that are more short-term in nature.