CriticalControl announces 2007 third quarter financial results



    - Quarter highlighted by $2.7m in debt reduction -

    CALGARY, Nov. 13 /CNW/ - CriticalControl Solutions Corp., (TSX-V:CCZ)
today reported its third quarter financial results for the three months ended
September 30, 2007. (All dollar amounts are expressed in thousands unless
otherwise stated).

    
    Highlights for the quarter included:

    -   10% increase in total revenue from continuing operations to $5,709 in
        Q3 2007 from $5,167 in Q3 2006;
    -   Prior to a restructuring charge of $102 in the quarter, EBITDA(1)
        from continuing operations increased by 37% to $753 in Q3 2007 from
        $550 in Q3 2006;
    -   4% increase in gross margin(2), as a percentage of revenue, to 48% in
        Q3 2007 from 44% in Q3 2006;
    -   Divestiture of PipeWorks division to Energy Solutions International,
        Inc.
    -   Made payments totalling $2.7 million towards debenture with
        Wellington Financial.
    

    "In the quarter we divested our unprofitable business lines and
restructured our operations to optimize our go forward profitability," said
Alykhan Mamdani, President & CEO. "Our improved operational performance
combined with continued growth in revenue, despite lower activity levels among
our Energy clients is indicative of the success of our plan."

    Q3 Financial Review from Continued Operations (in thousands):

    Total revenue was $5,709 for the three months ended September 30, 2007
compared with $5,167 for the same three month period in 2006, an increase of
$542 or 10%.
    Low natural gas prices combined with industry cost escalation has
resulted in significantly reduced gas exploration activity. Although growth in
the Corporation's continuing operations in the Energy sector is dependant in
large part on drilling activity, revenue from the Energy sector was $2,800 for
the three months ended September 30, 2007 compared with $2,552 for the same
three month period in 2006, an increase of $248 or 10%. This increase is
indicative of the Corporation's success in optimizing revenue from its
industry penetrated client base.
    Revenue from the Government sector was $2,909 for the three months ended
September 30, 2007 compared with $2,615 for the same three month period in
2006, an increase of $294 or 11%. This increase was attributable to the
renewed three-year contract for an expanded set of imaging, analysis and
information control services with a Western Canadian Province in April of
2007.
    Overall gross margin as a percentage of revenue was 48% for the three
months ended September 30, 2007 compared with 44% for the same three month
period in 2006, an increase of 4%. Gross margins in the Government sector
increased to 42% for the three months ended September 30, 2007 from 40% in the
same period in 2006. This increase was partially a result of the Company
increasing its rates to match increases in labour cost. Energy sector gross
margins increased to 54% for the three months ended September 30, 2007 from
49% in the same period in 2006. This increase is attributable to the
Corporation's growth of recurring revenue.
    EBITDA from continuing operations was $495 for the three months ended
September 30, 2007 compared with $550 for the same three month period in 2006,
an increase of 18%. Prior to a restructuring charge of $102, EBITDA for the
three months ended September 30, 2007 was $753, a 37% increase from the same
period in 2006.
    Selling and administrative expenses ("SG&A") were $1,706 for the three
months ended September 30, 2007 compared with $1,649 for the same three month
period in 2006, an increase of $57 or 3%. The increase in SG&A expenses was
attributed to the addition of ProTrend which was acquired in August 2006,
Idein Technology which was acquired in March 2007 and the increased level of
support and infrastructure required to accommodate the expansion of the
Corporation's Netflow business and related recurring revenue stream.
    Net income was $27 or ($0.00) per share for the three months ended
September 30, 2007 compared with a net loss of $140 or ($0.00) per share basic
and diluted for the same three month period in 2006.

    First Nine Months 2007 Financial Review from Continued Operations:

    Total revenue was $17,595 for the nine months ended September 30, 2007
compared with $16,326 for the same nine-month period in 2006, an increase of
$1,269 or 8%.
    Revenue from the Energy sector was $8,094 for the nine months ended
September 30, 2007 compared with $7,455 for the same nine-month period in
2006, an increase of $639 or 9%.
    Revenue from the Government sector was $9,501 for the nine months ended
September 30, 2007 compared with $8,871 for the same nine-month period in
2006, an increase of $630 or 7%.
    Gross margin from as a percentage of revenue was 47% for the nine months
ended September 30, 2007 compared with 46% for the same nine-month period in
2006, an increase of 1%.
    For the nine months ended September 30, 2007 EBITDA fell to $2,211
compared with $2,692 in the same nine month period in 2006, a decrease of 18%.
The reduced EBITDA resulted from a restructuring charge of $102 in the third
quarter and a $518 increase in research and development costs during the nine
month period.
    Working Capital decreased to ($64) at September 30, 2007 from $2,545 at
September 30, 2006 due to the Corporation's long term debt coming current,
offset in part from positive cash flow from operations. The Corporation
retired the $1.7 million debenture due in August, 2007 from cash on hand and
made an additional payment of $1 million towards the debenture currently due
in January, 2008. Management anticipates that it will pay down a portion of
the remaining $3.25 million from cash flow and replace the remainder with a
more conventional debt facility.
    Net income was $313 or 0.00 per share for the nine months ended
September 30, 2007 compared with a net income of $486 or $0.00 per share basic
and diluted for the same nine-month period in 2006.

    
    EBITDA Reconciliation to Net Income:

    Reconciliation of EBITDA to net income from continued operations is shown
    below:

                                                 For the             For the
                                      three months ended   nine months ended
                                        Sep 30    Sep 30    Sep 30    Sep 30
                                          2007      2006      2007      2006
                                      ------------------- -------------------
    Net income (loss)                       27      (140)      157       486
    Add:
    Interest                               239       303       808     1,132
    Depreciation of Capital Assets         258       262       720       727
    Amortization of Customer
     Contracts                             127       125       370       347
                                      ---------------------------------------
    EBITDA                                 651       550     2,055     2,692
                                      ---------------------------------------
                                      ---------------------------------------
    

    Subsequent Event:

    On October 31, 2007 the company announced that its wholly-owned
subsidiary CriticalControl Solutions Inc. was awarded a one year contract for
outsourced document control services for an Alberta-based Health Care
provider. The agreement also included an option for two, one year extensions
to the newly signed contract. Prior the award, CriticalControl was providing
similar services to the client under a contract awarded in 2004. Based on
historic and projected volume, the Company expects revenue from the contract
to exceed $1 million for the initial year, an increase of over 30% from the
previous agreement.

    Outlook:

    During the past four years, management completed the formation of the
basis of its go forward business strategy in both the government and energy
sectors. In 2006, management continued its focus on executing the strategy and
key acquisitions were made with a view to providing more services to the
existing client base and maximizing long-term profitability. The results for
the fourth quarter of 2006 and first half of 2007 are indicative of the
success of the start of this transition. Management intends to continue its
drive to obtain operational efficiencies and to aggressively pursue identified
areas of strategic growth to achieve increased gross margin as a percentage of
revenue for the remainder of 2007 and 2008.
    Growth in early 2007 in the Government sector was dampened due to the
cost of labour and the resulting impact on gross margins. In Q2 of 2007, gross
margins improved as these costs were passed onto the Corporation's customers.
Management anticipates continued organic growth in its Government business to
offset a reduced gross margin such that the contribution from the Government
business will remain as strong in 2007 as it was in 2006. Management
anticipates gross margins to continue improving in 2008 once labour cost
increases can be reflected into the Corporation's longer term contracts.
    Continued growth in overall gross margin, and ultimately growth in net
income will be ultimately derived from the execution of the Corporation's
business plan for its offering to its energy clients ("Energy Strategy").
Management anticipates that the Corporation's Energy Strategy will continue to
fuel overall organic growth in the Corporation's business in 2007 in line with
2006, and as such, will lead to improved cash flow and profitability.
    The Corporation's Energy Strategy concentrates on the areas of the
Company capable of long term recurring profitability. The Corporation's
measurement services now include gas chart integration through its proprietary
ScanGas application, gas well monitoring and control through the Corporation's
proprietary NetFlow Network, value added services to manage fluid analysis
data through the Corporation's proprietary ProTrend application and services
that provide access to and control of electronic flow measurement and other
devices at the well site. The control of field devices is an essential
component of the Corporation's plan to consolidate its various applications
into a system of integrated management of energy data.

    
    The following metrics reflect our market leadership position in the gas
    measurement arena.
    -------------------------------------------------------------------------
                                     2007                      2006
    -------------------------------------------------------------------------
    Services Provided to
     Active Measurement
     Points at the end
     of each Quarter           Q3     Q2     Q1      Q4     Q3     Q2     Q1
    -------------------------------------------------------------------------
    Chart Recorders -
     Measurement
     (meters)              30,038 29,273 29,849  32,065 32,625 33,309 32,199
    Electronic Flow
     Measurement
     Devices -
     Measurement and
     Control                2,269  2,224  2,158   2,013  1,831  1,494    597
    Fluid Analysis -
     Composition
     Management            60,974 53,818 44,874  39,589 35,464     NA     NA
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The 9% drop in Chart Recorders serviced in the first half of 2007 from Q4
2006 is not indicative of the growth in the Corporation's chart reading
business. The decline reflects reduced meter testing due to business cycles
and exemptions from measurement obtained by certain of the Corporation's
clients for low producing wells. CriticalControl has secured additional
clients for its chart reading business during Q2 which resulted in a      
2.6% recovery in Q3 2007, with further recovery expected in Q4 2007 and Q1
2008.
    The acquisition of the RDA Network in April 2006 increased the number of
measurement points being serviced, whereas the acquisition of ProTrend
Software in August 2006 increased both the number of measurement points being
serviced and provided additional value added services which could be provided
to each measurement point.
    By the end of September 2007, ProTrend provided services for over
22 clients totaling over 60,000 fluid analyses. Of these measurement points
currently in the ProTrend database, approximately 5,800 are also serviced by
CriticalControl for gas measurement and or well site control purposes. This
presents an opportunity to cross sell CriticalControl's expanded services
within both client bases, and combined with an aggressive strategy to increase
value added services from a measurement point perspective is a key component
of the Corporation's growth plan. Management's efforts in this regard started
with the acquisition of Idein Technologies in March 2007 and will continue
through 2007, resulting in increased gross margin as a percentage of revenue.
    The Corporation is executing a two-fold strategy designed to fuel growth
for the remainder of 2007 and 2008: increase the number of measurement points
being serviced; and to provide value added services to increase the net
revenue derived from each measurement point.
    Management expects the labour market in Alberta to continue to pressure
costs, and as such, management continues to invest in technology and processes
to ensure business continuity and cost control. In 2007 management intends to
continue its drive to obtain operational efficiencies and to aggressively
pursue our identified areas of strategic growth.

    
    (1) EBITDA, defined as earnings, before interest, taxes, depreciation and
        amortization, does not have any standardized meaning prescribed by
        GAAP, but management believes is a useful supplemental measure of
        operational performance.

    (2) Gross margin, defined as revenue less direct cost of revenue, and
        gross margin percentage do not have any standardized meaning
        prescribed by GAAP, and may not be comparable to similar measures
        used by other companies. Management believes that gross margin is a
        key performance indicator of the operational performance of the
        Corporation's business and its ability to increase profitability
        through growth.
    

    We seek safe harbour.

    About CriticalControl:

    CriticalControl is a technology company that builds, implements and
manages critical business process solutions. Our proprietary products are data
management tools to operate the critical business operations of our government
and energy sector clients. In addition to our proprietary products, we
implement large scale document and records management solutions using our
strong domain expertise and in depth knowledge of our customer base. Where
critical processes require unconditional continuity, our clients look to us to
manage and perform certain operational functions on a short term or long term,
outsourced basis. For more information please visit www.criticalcontrol.com.

    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this press release.





For further information:

For further information: Alykhan Mamdani, President & CEO, Tel (403)
705-7500; or David Feick, The Equicom Group, Tel (403) 538-4787, Fax (403)
266-2453, dfeick@equicomgroup.com

Organization Profile

CRITICALCONTROL SOLUTIONS CORP.

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