Pure Technologies Announces Second Quarter 2015 Results

CALGARY, Aug. 5, 2015 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial results for the three and six month periods ended June 30, 2015. For the second quarter, the Company recorded revenue of $29.4 million, adjusted EBITDA of $4.6 million and profit of $0.4 million. This compares to revenue of $20.5 million, adjusted EBITDA of $4.3 million and profit of $0.5 million in the second quarter of 2014.

"Since acquiring Wachs Water Services at the beginning of April, we have made great progress integrating our businesses, solidifying our position as the leader in pipeline condition assessment and management while strengthening and diversifying our revenue base," said Jack Elliott, President and CEO of Pure. "Our oil and gas pipeline integrity division, PureHM, acquired on October 1, 2014, had a strong quarter and is currently experiencing a high level of activity. Additional inspection equipment is being assembled to meet increasing demand. Pure's recent overall performance reflects incremental revenue growth through acquisitions and on-going optimization and strategic initiatives to support future growth. A major focus in the quarter was to improve and increase sales capacity within our core Americas region. We also secured new, multi-year work worth up to USD$60 million with one of our major, long-term water customers representing a significant increase over the value and duration of prior awards. Through the progress we've made on many fronts during the year-to-date, we are confident we can generate strong overall growth in 2015."

Table of Selected Financial Results:
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 website (www.puretechltd.com).








For the period ended

June 30

Three
months
2015

Three
months
2014

Change

Six
months
2015

Six
months
2014

Change

$

%

$

%

Revenue

29,411

20,455

8,956

44

44,077

33,074

11,003

33

Cost of sales

7,464

5,847

1,617

28

11,422

8,574

2,848

33

Gross profit

21,947

14,608

7,339

50

32,655

24,500

8,155

33

Gross margin (%)

75

71


-

74

74


-

Operating Expenses1

21,619

13,103

8,516

65

37,502

24,832

12,670

51

Adjusted EBITDA2

4,595

4,274

321

8

2,510

4,793

(2,283)

(48)

Profit (loss)

416

454

(38)

(8)

(1,888)

1,061

(2,949)

(278)


Per share – basic

0.01

0.01



(0.04)

0.02




Per share – diluted

0.01

0.01



(0.04)

0.02



Adjusted profit3

682

1,801

(1,119)

(62)

(3,204)

1,821

(5,025)

(276)

Total assets4

135,523

130,989

4,534

3

135,523

130,989

4,534

3

1.

Excludes Libya accounts receivable, other provisions, and loss (gain) on asset disposal. 

2.

Adjusted EBITDA is EBITDA before gains or losses on foreign exchange, costs directly attributable to acquisitions, stock-based compensation transactions, and other significant one-time expenses. 

3.

Adjusted Profit is Profit (loss) before costs directly attributable to acquisitions, stock-based compensation transactions, and other significant one-time expenses.

4.

Comparative figure is as at December 31, 2014.

 

Financial Highlights for the Three and Six Months Ended June 30, 2015

  • Total revenues increased 44% for the second quarter to $29.4 million and 33% year-to-date to $44.1 million, compared to 2014. Wachs Water Services ("WWS"), acquired on April 1, 2015, contributed $5.5 million to the three and six month periods. PureHM's revenue, which includes oil and gas SmartBallTM inspection revenue previously reported in the Americas segment, grew by $3.8 million and $5.2 million in the three and six month periods, respectively, compared to last year.
  • Gross margin improved to 75% in the second quarter of 2015 compared to 71% in the comparable period in the prior year, and remained consistent at 74% compared with the six month period last year. Gross margin improved in the quarter due to a greater proportion of lower margin consulting revenues, mainly in Australia, in the prior year. 
  • Operating expenses for the three and six month periods were $21.6 and $37.5 million compared to $13.1 million and $24.8 million for the same periods in 2014, respectively.  
    • The increase reflects: $5.9 million and $7.5 million of incremental costs for the three and six month periods, respectively, attributable to the PureHM and WWS businesses; increased headcount relative to prior periods to support future growth; the adverse impact of a weakening Canadian dollar; and, $0.7 million of direct costs related to acquiring WWS, mainly incurred in the quarter.
    • Operating expenses in total, and adjusting for costs associated with the acquisition of WWS, are consistent with the Company's budget.
  • Adjusted EBITDA of $4.6 million in the second quarter and $2.5 million for the six month period compared to Adjusted EBITDA of $4.3 million and $4.8 million for the same periods in 2014, respectively.
    • Increased revenues in the second quarter were substantially offset by the impact of a higher fixed cost base to support the anticipated increase in activity in the second half of the year.
    • The six month period was impacted by a seasonally slower first quarter combined with a higher fixed cost base previously discussed.
  • Profit for the quarter was consistent with last year at $0.4 million on account of foreign currency gains. The loss of $1.9 million for the six month period compared to profit of $1.1 million for same period last year was a result of the aforementioned operating cost increases.
    • 2015 year-to-date profit benefited from the inclusion of a $1.6 million recovery on the accounts receivable from a customer in Libya, which was fully provided for in 2014.
  • Working capital at June 30, 2015 was $44.2 million including $7.9 million in cash and no debt.

Business, Operations & Outlook

Overall, activity in the second quarter of 2015 was in line with expectations following the acquisition of WWS on April 1, 2015. Integration activities commenced immediately following the acquisition with a strong focus on increasing and combining the Pure and WWS marketing and sales teams to generate future growth in the Americas region across both Pure's and WWS customer bases. It is expected that operational and cross-selling synergies will begin to be realized in 2016 and beyond as integration progresses. 

Consistent with prior years, activity is expected to increase in the second half of the year across all business lines. Pure anticipates that the revenue mix for the remainder of 2015 will be comprised mainly of inspection and consulting services, with proportionately lower revenue from equipment sales compared to 2014. While, in the long term, Pure expects this trend to continue as its inspection and consulting services businesses grow, the impact will be more pronounced this year as equipment sales declined due to the deferral of large acoustic fibre-optic ("AFO") projects in Mexico and Australia.

In spite of the AFO project deferrals, the outlook for Pure's international business remains positive and the Company is seeing increasing interest in its technologies and services in Europe, Asia, South Africa and Australia. In the second half of the year, Pure will be undertaking projects in the UK, Denmark, South Korea and South Africa, to complement existing projects in Qatar and Saudi Arabia. Pure has mobilized for new projects in Asia and the UK for execution in the third quarter.

Following a traditionally slow first quarter, PureHM had a strong second quarter and expects the level of activity and increasing demand it is currently experiencing for its proprietary inspection and tracking services to continue into the second half of the year. SmartBall technology deployments in oil pipelines are also anticipated to increase substantially year-over-year with the increased focus on oil and gas customers that PureHM services.

The anticipated continued strength of the US dollar is expected to benefit Pure as a large portion of the Company's revenue is US dollar denominated. Subject to factors including client scheduling and foreign exchange impacts, the Company anticipates the third quarter to be slightly higher than the second quarter.

In addition to focusing on growth, the Company is increasing its emphasis on cost management for the balance of 2015 and beyond. Operating costs have increased substantially as a result of our recent acquisitions and we remain susceptible to the negative impact of quarterly revenue volatility on EBITDA.  As such, management is working to increase operational efficiency to optimize costs without impairing revenue generation. We expect to see the benefits of these efforts in 2016 and future years. 

Conference Call and Webcast

A teleconference and webcast will be held tomorrow morning, August 6 2015, at 10:30 am EDT to discuss these results. Presentation slides will be made available on the Company's website prior to the call.

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 5 to 10 minutes prior to the scheduled start time and simply ask to join the Pure Technologies Ltd. Second Quarter 2015 Results 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: 1246

Webcast & Presentation Slides:  Investors will be able to listen to the conference over the Internet as well as access presentation slides (in pdf format) to follow along during the call.

  • Links to the webcast and presentation slides will be available approximately 30 minutes prior to the call on Pure's website. Under the "Investors" main menu tab, select "Presentations, Events and Webcasts".
  • The webcast will be archived for 90 days.

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 asset management, non-revenue water and 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 relating to the benefits expected to be realized from acquisitions, where the Company forecasts the timing of new and existing projects, the success of the Company's new technologies and entering new markets, the Company's ability to generate future cash flows and the timing and amount of future dividend payments.   The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking information, include, but are not limited to,  the Company's ability to successfully integrate the Wachs Water business into its existing operations, 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 website at www.puretechltd.com or contact Paul Moon, Investor Relations; (403) 266-6794 or investor.relations@puretechltd.com.

RELATED LINKS
http://www.puretechnologiesltd.com

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