Pure Technologies Announces First Quarter 2017 Results

CALGARY, May 1, 2017 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial performance for the quarter ended March 31, 2017.

First Quarter Highlights:

  • Revenue up 16% to $29.2 million, which includes:
    • Water Division up 18% to $24.0 million
      • 22% increase in Wachs Water Services ("WWS") business, to $5.2 million
      • 116% increase in the International business, to $5.0 million
      • Americas revenue was consistent year-over-year at $13.9 million; excluding foreign exchange impacts, revenue increased by $0.5 million, or 3%
    • Oil and Gas Division – PureHM – up 10% to $5.2 million
      • includes $0.7 million from E-MAC Corrosion Inc. ("E-MAC"), acquired December 30, 2016
    • Organic revenue growth of 16%; foreign exchange impact equally offset by E-MAC revenue contribution
  • Gross margin percentage increased to 82% (2016 – 75%), due to improved project management and execution combined with sales mix
  • Adjusted EBITDA up 342% to $4.9 million reflecting:
    • Improved profitability of WWS due to increased revenues and lower costs from combining shared services in the second half of 2016
    • Increased activity and resulting contribution from the International water business
    • Improved gross margins as described above
    • Cost savings from the Company's cost optimization plan commenced in 2015
    • Partially offset by lower Adjusted EBITDA from PureHM due to the impact of adverse weather and E-MAC integration activities
  • Cash flow from operations before working capital changes in the first three months of 2017 improved to $4.4 million from $1.1 million in 2016, due to the reasons above
  • First quarter net income improved to $0.3 million from a $2.5 million loss in 2016, reflecting improved operating results and a lower foreign currency loss of $0.1 million in the current period (2016 - $0.8 million loss)
  • At the end of the quarter, Pure had $5.7 million of cash, $34.5 million of working capital, and a $10 million undrawn credit facility

"I am pleased to report on a satisfactory first quarter for Pure," said Jack Elliott, President and CEO of the Company. "Our water business grew by 18% over last year, driven by strong performances by Wachs Water Services, and growth internationally and in the eastern U.S.  Revenue from our oil and gas business was $5.2 million, up 10% from the same quarter last year, of which E-MAC, acquired at the end of 2016, contributed $0.7 million.

"The improvement in WWS is a result of a general increase in business activity as well as productivity improvements realized through better operations performance measurement and management. We expect these trends to continue throughout the year.

"Our international water business benefited in the quarter from the completion of a major PipeDiverTM inspection project in Europe, and we expect additional PipeDiver projects in this region and in Australia later in the year. On April 25, 2017, we announced a partnership agreement with Xylem, Inc. for certain countries in the Middle East and Asia, which provides us with access to Xylem's distribution channels and extensive business infrastructure in these countries. We are working closely with the Xylem team to build on the brand awareness and reputation we have established over the last few years to continue to grow revenues and earnings in these markets, to our mutual benefit."

Financial Highlights for the Three Month Period Ended March 31, 2017
For further details on the results, please refer to Pure's Management Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's IR website.

For the period ended March 31

2017

2016

Change

$

%

Revenue

29,206

25,121

4,085

16

Direct costs

5,355

6,249

(894)

(14)

Gross profit

23,851

18,872

4,979

26

Gross margin (%)

82

75



Operating Expenses1

22,489

21,111

1,378

7

Adjusted EBITDA2

4,900

1,108

3,792

342

Adjusted EBITDA (%)

17

4



Net income (loss) for the period

299

(2,458)

2,757

 NA

Per share – basic

0.01

(0.05)



Per share – diluted

0.01

(0.05)



Cash Flow from Operations Before Working Capital Changes2

4,449

1,119

3,330

298

Adjusted Net Income (Loss) for the period2

385

(1,488)

1,873

 NA

Total assets

140,665

143,578

(2,913)

(2)

1. Excludes direct costs and loss or gains on asset disposals, includes depreciation and provisions

2. See Non-GAAP Measures.

 

Outlook

With the start of spring and improved weather, activity in the Americas Water Segment is expected to increase across North America, particularly in those regions where winter adversely affects activity, namely Canada and the eastern U.S. Early this year, Pure was awarded multi-year program work and renewal of services on inspection and consulting contracts that provide management with greater confidence the Segment is making positive strides towards its goals. Pure continues to expect organic growth in this Segment in 2017 of between 5 and 15%. 

The Company expects moderate growth in 2017 for its International Water Segment based on its current pipeline of opportunities, a large PipeDiver project in the U.K. and renewals on a leak detection project in Qatar and for pipeline monitoring in Mexico.  Pure continues to actively pursue high value opportunities and potential partnerships in key markets and execute on its strategy of minimizing international overhead with small, focused regional sales offices and partnership agreements where it proves to be the most beneficial approach.  The Company is in the early stages of its partnership with Xylem which aligns with this strategy and is expected to increase sales. 

For WWS, first quarter results reflect the change in management's focus made in mid-2016 and the positive impact of an increased sales force on revenue and bookings. Bookings, which are the leading indicator of future activity, have increased 17% for the twelve month period ended March 31, 2017 compared to the year-ended December 31, 2016. Through these actions and based upon the growth in booked work, Pure continues to expect that WWS will return to pre-acquisition activity levels by 2019, with a corresponding increase in profitability. 

PureHM is expected to continue to be the Company's fastest growing division. Market acceptance continues to grow for the Spectrum XLITM and SmartBallTM technologies in the oil and gas sector. Lower first quarter organic growth and profitability compared to the prior year reflects the impact of adverse winter weather in Canada on productivity and project timing and E-MAC onboarding activities undertaken early in the year. Management remains focused on the continued recruitment, training and development of its workforce, a critical component in sustaining expected growth objectives. Current year growth has been kick-started with the award of over $3 million of inspection work from U.S. based pipeline companies to be completed in the first half of 2017. Several of these projects began in March 2017 and the remainder are scheduled for the second quarter of 2017.

Second and third quarter activity is expected to increase significantly for PureHM over the first quarter of 2017, with spring and summer weather anticipated to increase both productivity and timing of projects.  During the first quarter, PureHM renewed approximately $6.0 million of multi-year contracts with E-MAC customers. 

Conference Call and Webcast

A teleconference and webcast will be held tomorrow morning, May 2, 2017, at 10:30 am EDT. Senior Management will speak to the results and provide a financial and business update.

Teleconference:  The telephone numbers for the conference are toll-free 1-800-319-4610 (within Canada & USA) and 416-915-3239 (Local / International).

  • Callers should dial-in 10 minutes prior to the scheduled start time and simply ask to join the Pure Technologies Ltd. Conference Call
  • A replay will be available approximately two hours after the call for two weeks. Access the replay by calling 1-855-669-9658 (toll-free within Canada & USA). Use the following Passcode followed by the number sign: 1347

Webcast & Information Slides: Investors will be able to listen to the conference over the Internet as well as access supplemental information slides (in pdf format).

About Pure Technologies Ltd.

Pure Technologies Ltd. is an international asset management, technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure's business model incorporates four distinct but complementary business streams:

  • Sales of proprietary monitoring technologies for pipelines, bridges and structures;
  • Recurring revenue from data analysis, site maintenance, and from technology licensing;
  • Premium technical services including pipeline inspection, leak detection and condition assessment;
  • Specialized engineering services in areas related to asset management, primarily in the area of pipeline condition assessment for water and wastewater infrastructure.

Forward-Looking Statements

This News Release contains forward-looking statements, including, without limitation, statements containing the words "should", "believe", "anticipate", "may", "plan", "will", "continue", "intend", "expect", "estimate" and other similar expressions.  These statements constitute "forward-looking information" within the meaning of applicable Canadian securities laws.  These statements are based on the Company's current expectations, estimates, forecasts and assumptions. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other important factors that could cause the Company's actual performance to be materially different from that projected. Examples of these statements would include those where the Company forecasts the timing of new and existing projects and the success of the Company's new technologies and entering new markets. The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking information, include, but are not limited to forecasted growth rates, market changes, the Company's ability to deliver services in a timely and cost effective manner, technological change, changes in general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in the Company's Annual Information Form, which filings can be found at www.sedar.com. Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise.

® Registered Trademarks, property of Pure Technologies Ltd.

"The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release"

SOURCE Pure Technologies Ltd.

For further information: To find out more about Pure Technologies Ltd. (TSX: PUR), visit our IR website or contact Paul Moon, Director of Investor Relations; (403) 537-3244 or investor.relations@puretechltd.com.

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http://www.puretechltd.com

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