CriticalControl announces 2008 second quarter financial results



    - Quarter highlighted by record earnings and 10% increase in Gross Margin
    as a percentage of revenue -

    CALGARY, Aug. 5 /CNW/ - CriticalControl Solutions Corp., (TSX-V:CCZ)
today reported its second quarter financial results for the three months ended
June 30, 2008. (All dollar amounts are expressed in thousands unless otherwise
stated):

    
    Highlights for the quarter included (Q2 2008 compared to Q2 2007):

    -   13% increase in total revenue to $6,253 in 2008 from $5,528 in 2007;

    -   24% increase in total gross margin to $3,408 in 2008 from $2,742 in
        2007;

    -   10% increase in gross margin as a percentage of revenue to 55% in
        2008 from 50% in 2007;

    -   2,500% increase in net income to $702 in 2008 compared to net income
        from continued operations of $27 in 2007;

    -   The Corporation purchased and cancelled 3,139,000 pursuant to a
        Normal Course Issuer Bid (the "Bid") announced on May 13, 2008 to
        purchase for cancellation up to 6,654,105 common shares.
    

    "In addition to solidly performing against the second quarter of 2007, we
have improved our revenue by 4%, gross margin percentage by 10% and net income
by 37% compared to the first quarter of 2008, which is traditionally our
strongest quarter," said Alykhan Mamdani, President and CEO of
CriticalControl. "Despite going into the third quarter, which is typically our
weakest, Management anticipates bottom line performance from the second half
of the year to be at least consistent with the first half."

    Financial Review (in thousands):

    Second Quarter Fiscal 2008 Financial Review

    Total revenue was $6,253 for the three months ended June 30, 2008
compared to $5,528 for the same three month period in 2007, an increase of
$725 or 13%.
    Revenue from the Energy sector was $2,676 for the three months ended June
30, 2008 compared to $2,457 for the same three month period in 2007, an
increase of $219 or 9%. Revenue from the Corporation's gas chart integration
application, ScanGas and the Corporation's web-SCADA application, NetFlow were
up 2.5% and 9% respectively in the second quarter of 2008 compared to 2007.
Revenue from the Corporation's fluid analysis management application, ProTrend
increased by 48% to $243 in the second quarter of 2008 compared to $171, in
the same period in 2007. Fluctuations in quarterly performance tend to occur
from the demand for third party electronic flow measurement devices and
equipment related to the Corporation's web-SCADA application, NetFlow. This
fluctuation is caused by demand from drilling activity for natural gas. Demand
dipped in the first quarter of 2008 compared to the first quarter of 2007
reducing revenue in the quarter by $563. Sales in the second quarter of 2008
partially recovered and were $155 higher than the same period in 2007.
    Revenue from the Government sector was $3,577 for the three months ended
June 30, 2008 compared to $3,071 for the same three month period in 2007, an
increase of $506 or 16%. The strong growth in revenue from the Corporation's
Imaging Service Bureau in this period was offset by strategic measures
undertaken by management which resulted in a decrease in the sale of third
party imaging equipment and a decline in real property solutions consulting
for US municipalities. The end result was a modest increase in revenue, but a
strong increase in both gross margin and bottom line profitability.
    Gross margin(1) as a percentage of revenue increased to 55% for the three
months ended June 30, 2008 compared to 50% for the same three month period
2006, an increase of 10%.
    Gross margin(1) as a percentage of revenue for the Energy sector
increased to 64% for the three months ended June 30, 2008 compared to 60% for
the same three month period in 2007, an increase of 7%. The cost of revenue
for the Corporation's offering in the energy sector continued to drop in the
second quarter of 2008 due to the Corporation's investment last year to refine
its gas chart reading processes and software. Also, due in part to a reduction
in electronic flow measurement and related equipment sales in the same period,
which traditionally carries a much lower margin than the Corporation's
proprietary technologies. As a result, costs have continued to decrease while
revenue has increased resulting in record gross margins.
    Gross margin(1) as a percentage of revenue for the Government sector
increased to 47% for the three months ended June 30, 2008 compared to 41% for
the same three month period in 2007, an increase of 14%. Cost of revenue for
the Corporation's offering in the government sector increased by only 5% in
the second quarter of 2008 compared to the previous year, notwithstanding a
healthy 16% increase in revenue. The results of management's focus on taking
advantage of economies of scale and shifting focus to its core offerings
information control outsourcing and information control service bureaus has
resulted in significantly improved gross margins both for the quarter and a
year to date basis.
    Selling and administrative expenses ("SG&A") was $2,179 for the three
months ended June 30, 2008 compared to $1,774 for the same three month period
in 2007, an increase of $405 or 23%. Selling and administrative expenses
increased in the quarter over the previous year due to increased labour cost,
increased leasing costs in the current real estate environment in Alberta and
the Corporation's drive to better market and sell its products in both the
Government and Energy sectors.
    The Government sector saw the selling and administrative expenses
increase by 50% to $851 for the three months ended June 30, 2008 from $566 for
the same three month period in 2007 due primarily to the Corporation's
expanded new office space in Edmonton housing its service bureau facility.
    The Energy sector SG&A for the three months ended June 30, 2008 was $657
compared to $707 for the same three month period in 2007. The costs were
contained due to reduced associated management requirements.
    Interest, contract losses and other expenses (including restructuring
charges) decreased significantly to $21 for the three months ended June 30,
2008 compared to $284 for the same three month period in 2007. This decrease
was due to Corporation's success in retiring its debt with Wellington
Financial and closing a traditional banking facility with Comerica Bank.
    The Corporation's net income for the three months ended June 30, 2008 was
$702 compared to net income from continued operations of $27 for the same
three month period in 2007. The increase was primarily due to the success of
the Corporation's growth focus and discontinued operations of non-performing
units in 2007.
    The Corporation's working capital position changed significantly to
$2,289 at June 30, 2008 from $1,185 as at December 31, 2007. The increase was
after the additional debt payment of $1.17 million and primarily due to
positive cash flow from operations.

    First Half 2008 Financial Review:

    Total revenue was $12,248 for the six months ended June 30, 2008 compared
to $11,886 for the same six month period in 2007, an increase of $363 or 3%.
    Revenue from the Energy sector was $5,273 for the six months ended June
30, 2008 compared to $5,294 for the same six month period in 2007. Despite an
increase in revenue in the second quarter of 2008 compared to the previous
year, revenue for the six months ended June 30, 2008 remained flat compared to
the previous year. This is due to the drop in revenue in the first quarter of
2008 compared to the same period in 2007 attributed to a $563 decline in
electronic flow measurement devices and related equipment.
    Revenue from the Government sector was $6,975 for the six months ended
June 30, 2008 compared to $6,592 for the same six month period in 2007, an
increase of $383 or 6%. Steady revenue growth from the Government Sector was
led by increased demand for the Corporation's Imaging Service Bureau resulted
in imaging revenue growing at a healthy pace of 46% to $3,620 in the six
months ended June 30, 2008 compared to $2,474 in the same period last year.
    Gross margin(1) as a percentage of revenue was 53% for the six months
ended June 30, 2008 compared to 46% for the same six month period in 2007, an
increase of 15%.
    Selling and administrative expenses ("SG&A") was $4,224 for the six
months ended June 30, 2008 compared to $3,697 for the same six month period in
2007, an increase of $527 or 14%.
    Interest, contract losses and other expenses (including restructuring
charges) decreased significantly to $58 for the six months ended June 30, 2008
compared to $578 for the same six month period in 2007.
    The Corporation's net income for the six months ended June 30, 2008 was
$1,206 compared to $124 for the same six month period in 2007.
    The Corporation purchased and cancelled 3,139,000 of its shares in the
period ended June 30, 2008 pursuant to a Normal Course Issuer Bid (the "Bid")
announced on May 13, 2008 to purchase for cancellation up to 6,654,105 common
shares.

    OUTLOOK:

    Growth in 2008 from the Corporation's Government sector business will
continue to be derived from the Corporation's information control outsourcing
and information control service bureau which continues to generate strong
revenue and bottom line growth. Strategically, management intends on expanding
its scope of services within these two initiatives with a view of expanding
these core services to other Western Canadian Provinces. Growth in 2008 and
2009 is expected to exceed that of 2007, being derived primarily from
continued organic growth combined with additional capabilities within our core
information control services. Growth from increasing the Corporation's
presence geographically is expected to commence being realized in 2010.
    Management's three year plan for the Corporation's Energy Sector business
is to establish the Corporation as an integrated partner in capturing field
data. In 2008, the Corporation has invested a total of $353 in addition to the
$908 invested in 2007. Management intends on continuing its research and
development project to complete the formation of a multi functional repository
for production data. Management anticipates that all its current volumetric
and composition data from its various service offerings will feed into this
new repository by the end of 2008. Management believes that by having a single
repository with full audit trail capabilities, the Corporation's clients will
benefit twofold. First, by having all volumetric and composition data in one
place, duplication and repeated administrative tasks will be reduced,
decreasing time and cost for the producer. Second, Management believes that it
will be in a strong position to provide value added services on a cost
effective basis which producers currently desire but are not willing to pay
the high cost associated with purchasing and integrating new software, such as
volumetric validation and editing. Management believes that the completion of
this effort will be a key factor in making its services more valuable to its
client base, which, in turn, will increase revenue in 2009 and beyond.
    The Corporation recently acquired ScadaNet to complement its NetFlow
service offering. Management expects that this acquisition will add $500 of
recurring revenue annually. Combined with strong growth over the past 2
quarters from the Corporation's fluid analysis management application,
ProTrend, management expects steady revenue growth and profitability to
continue in its Energy sector business over the course of 2008. Stronger
organic growth in revenue will be tied to increased levels of exploration
activity in the Western Canadian Sedimentary Basin, which management expects
to occur in the first half of 2009.
    Despite entering into the third quarter of the year, which historically
has been the weakest, Management is confident that its performance in the last
half of the year will be at least consistent with the first half of 2008.

    
    Services Provided to
     Active Measurement                       2008                2007
     Points at the end of             ---------------------------------------
     each Quarter                         Q2        Q1        Q4        Q3
    -------------------------------------------------------------------------
    Chart Recorders -
     Measurement (meters)               30,304    31,087    31,001    30,038

    Electronic Flow
     Measurement Devices -
     Measurement and Control             2,475     2,411     2,300     2,269

    Fluid Composition
     Management -
     Total Analyses                     80,764    67,029    60,240    53,619
    -------------------------------------------------------------------------


    Services Provided to
     Active Measurement                       2007                2006
     Points at the end of             ---------------------------------------
     each Quarter                         Q2        Q1        Q4        Q3
    -------------------------------------------------------------------------
    Chart Recorders -
     Measurement (meters)               29,273    29,849    32,065    32,625

    Electronic Flow
     Measurement Devices -
     Measurement and Control             2,224     2,210     2,013     1,831

    Fluid Composition
     Management -
     Total Analyses                     49,006    40,564    34,006    29,448
    -------------------------------------------------------------------------
    


    The Company's full fiscal 2008 second quarter financial statements and
management's discussion and analysis for the three months ended June 30, 2008
are posted on www.criticalcontrol.com.
    We seek safe harbour.

    About CriticalControl:

    CriticalControl Solutions Corp. (the "Corporation" or "CriticalControl")
enables its clients to increase operational performance through the better
control of critical business information. Through the balance of practicality,
innovation and technology, we empower our clients with everything from
strategies and tools, to outsourced solutions to manage information, wherever
and in whatever form that information exists.

    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

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CRITICALCONTROL SOLUTIONS CORP.

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