Pure Technologies Announces Second Quarter 2017 Results

CALGARY, Aug. 3, 2017 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial performance for the quarter ended June 30, 2017.

Second Quarter (Q2) and Six-Month Period (YTD) Highlights:

  • Total revenue up 16% to $33.7 million in Q2 and up 16% to $62.9 million YTD:
    • Water Division up 11% to $25.0 million in Q2 and up 14% to $49.0 million YTD mostly due to:
      • Americas Segment revenue increased 12% to $16.0 million in Q2 and 6% to $29.8 million YTD; excluding foreign exchange impacts, revenue increased by 8% and 6%, respectively
      • Wachs Water Services ("WWS") revenue increased 32% to $5.8 million in Q2 and 27% to $11.0 million YTD
    • Oil and Gas Division – PureHM – up 30% to $8.7 million in Q2 and up 22% to $13.9 million YTD
      • Q2 increase due to $1.4 million of E-MAC Corrosion Inc. ("E-MAC") revenue, acquired December 30, 2016, and 6% organic growth;
      • YTD increase due to $2.1 million of E-MAC revenue and 3% organic growth; the first quarter experienced lower growth due to weather related delays and the integration of E-MAC's operations
    • Organic revenue growth of 7% in Q2 and 12% YTD, which excludes revenue from new acquisitions and foreign exchange impacts
  • Gross margin percentage decreased to 78% in Q2 (Q2'16 – 82%) due to project mix and higher subcontractor use. YTD margin increased to 80% from 79% reflecting lower direct project costs, particularly within the Water Division
  • Adjusted EBITDA up 34% to $6.1 million in Q2 and up 94% to $11.0 million YTD mainly reflecting:
    • Increased activity and resulting contribution from the Americas (Q2) and International water business (YTD)
    • Improved profitability of WWS due to increased revenues and productivity, and lower costs from combining shared services in the second half of 2016
    • Cost savings from the Company's cost optimization plan commenced in 2015
  • Cash flow from operations before working capital changes up 54% to $6.2 million in the second quarter and up 108% to $10.6 million year to date due to the reasons discussed above
  • Net income improved 36% to $1.3 million in Q2 and YTD net income improved to $1.6 million from a $1.5 million loss in 2016 reflecting improved operating results and lower foreign currency losses in the current periods over the prior periods
    • Q2 Adjusted Net Income, which excludes major items such as foreign exchange impacts and Libyan accounts receivable collection, was $1.5 million compared to $0.1 million last year; YTD Adjusted Net Income of $1.9 million compared to a loss of $1.3 million last year
  • At the end of the quarter, Pure had $5.8 million of cash, $37.2 million of working capital, and a $10 million undrawn credit facility

"With the first half of 2017 behind us, Pure is well positioned to deliver strong results for 2017," said Jack Elliott, President and CEO of the Company. "I am pleased to report that in the second quarter, revenue grew by 16% with a corresponding 34% increase in Adjusted EBITDA. Net income also increased by 36% over the same period last year. Building upon a solid first quarter, six-month revenue increased by 16% while Adjusted EBITDA increased by 94%. Net income also improved to $1.6 million in the first half of the year from a $1.5 million loss last year.

"In our water business, our investment in sales personnel in 2015 and increased focus on operational excellence and cost control is driving both sales growth and increased profitability. The WWS segment continues its positive performance trend with revenue increasing 32% quarter-over-quarter, and 27% YTD, resulting in significant Adjusted EBITDA growth over these same periods last year. Internationally, expected activity in the second half of 2017 includes a large PipeDiverTM project in the UK and our first condition assessment project in South-East Asia, along with the extension of several leak detection projects. We also continue to develop our partnership with Xylem Inc., as discussed in the first quarter, with meaningful benefits expected in 2018.

"At PureHM, our oil and gas division, much of the focus in the first half of the year has been on integrating the E-MAC business which we acquired at the end of 2016. Second quarter revenues were the highest revenues on record for the division, consistent with our expectations. With integration essentially complete and a traditionally busier second half for E-MAC, activity levels are expected to remain high for the remainder of the year. We will continue investing in our people to ensure we can deliver the work we see ahead. In addition, to support the continued growth of our remote pig tracking business in 2018, we expect to invest an additional $1.5 million in tracking equipment this year."

Financial Highlights for the Three and Six-Month Periods Ended June 30, 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

June 30

Three

months

2017

Three

months

2016

Change

Six

months

2017

Six

months

2016

Change

$

%

$

%

Revenue

33,740

29,189

4,551

16

62,946

54,310

8,636

16

Direct costs

7,370

5,159

2,211

43

12,725

11,408

1,317

12

Gross profit

26,370

24,030

2,340

10

50,221

42,902

7,319

17

Gross margin (%)

78

82



80

79



Operating Expenses1

23,962

23,132

830

4

46,451

44,243

2,208

5

Adjusted EBITDA2

6,101

4,552

1,549

34

11,001

5,660

5,341

94

Adjusted EBITDA (%)

18

16



17

10



Net income (loss) for the period

1,311

967

344

36

1,610

(1,491)

3,101

na


Per share – basic

0.02

0.02



0.03

(0.03)




Per share – diluted        

0.02

0.02



0.03

(0.03)



Cash Flow from Operations Before Working Capital Changes2

6,170

3,997

2,173

54

10,619

5,116

5,503

108

Adjusted Income (Loss) for the period2

1,501

141

1,360

965

1,886

(1,347)

3,233

na

Total assets3

143,935

143,578

357

-

143,935

143,578

357

-

1.

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

2.

See Non-GAAP Measures

3.

Comparative figure is as at December 31 

 

Outlook

Americas Water Segment revenue in the first half of 2017 was in line with Pure's expectations, reflecting normal seasonality and increased activity in the second quarter, particularly in the Canada region.  As in prior years, activity is expected to increase in the second half of the year supported by new client acquisition and current project scheduling.  Earlier 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. Accordingly, given these factors, Pure remains on track to deliver organic growth in this Segment in 2017 of between 5 and 15%.

Internationally, Pure continues to pursue projects around the world in select, strategic markets.  Confirmed projects for the remainder of the year include the Company's first project with a municipal client in Chile, a large PipeDiver project in the UK and Pure's first condition assessment project in South-East Asia.  Meanwhile, work will continue on leak detection projects in Qatar, South Africa, Brazil and elsewhere using Pure's unique large diameter inspection platforms. 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 in 2018.

WWS' year-to-date results reflect the impact of new sales personnel (mid-2016) on revenue and bookings. Bookings, which are the leading indicator of future activity, have increased 9% for the twelve-month period ended June 30, 2017 compared to the same period 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 revenue levels by 2019, with a corresponding increase in profitability.

Market acceptance continues to grow for the Spectrum XLITM and SmartBallTM technologies in the oil and gas sector. Management remains focused on the continued recruitment, training and development of its workforce, a critical component in sustaining the division's expected growth objectives. Revenues were generated primarily from services being performed in Canada and the United States. Despite lower activity in the second quarter, the U.S. business, in particular, is anticipated to grow through increasing market acceptance of PureHM's services. As expected, the second quarter revenue activity exceeded the first quarter results as weather improved and E-MAC integration finished. Compared to prior year, revenue growth in the second half of the year is expected to be realized from increased activity in remote pig tracking projects. To prepare for this 2018 demand and to add capacity, Pure expects to spend an additional $1.5 million for remote tracking equipment over and above the existing capital budget. The incremental operations of E-MAC are expected to broaden the customer base while at the same time providing an entrance into cathodic protection system sales to existing customers. 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, August 4, 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: 1594

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).

  • Links to the webcast and slides will be available approximately 30 minutes prior to the call on Pure's IR website under the Events section.
  • 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 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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