Pure Technologies Announces Third Quarter Results And Declares Quarterly Dividend

CALGARY, Nov. 6, 2014 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial results for the three and nine-month periods ended September 30, 2014. For the third quarter, the Company recorded revenue of $17.1 million, adjusted EBITDA of $2.1 million and a loss of $0.2 million. This compares to revenue of $15.1 million, adjusted EBITDA of $2.7 million and a loss of $0.8 million in the third quarter of 2013.

"Pure delivered solid financial results while managing several strategic initiatives to enable additional business growth in both the water sector, and in the oil and gas pipeline sector through our newly established oil and gas division," said Jack Elliott, President and CEO of Pure. "We recently announced the business acquisition of Hunter McDonnell Pipeline Services, Inc. ("HM") which is expected to dramatically increase our presence in the oil and gas pipeline sector. HM's rapidly growing business will be reflected in our fourth quarter results. Work with water pipeline customers continued during the recent quarter along with project planning in preparation for an extremely busy fourth quarter, historically the busiest period for the Company. Additionally, we made further investments through the hiring of new technical personnel and through ongoing improvements to our internal processes to ensure we can manage the growth we are experiencing. We look forward to achieving our financial targets for 2014."

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).

($000s Canadian dollars,  unless otherwise indicated and per share amounts)		Three months ended Sept 30, 2014	Three months ended Sept 30, 2013	$ Change	% Change	Nine months ended Sept 30, 2014	Nine months ended Sept 30, 2013	$ Change	% Change
Revenue		17,118	15,144	1,974	13	50,192	43,628	6,564	15
Cost of sales		3,091	3,611	(520)	(14)	11,665	9,657	2,008	21
Gross profit		14,027	11,533	2,494	22	38,527	33,971	4,556	13
Gross margin (%)		82	76			77	78		-
Operating Expenses		14,266	10,425	3,841	37	39,098	31,526	7,572	24
Adjusted EBITDA*		2,141	2,745	(604)	(22)	7,010	8,587	(1,577)	(18)
Profit (loss) for the period		(218)	(776)	558	(72)	843	268	575	215
	Per share – basic	(0.00)	(0.02)			0.02	0.01
	Per share – diluted	(0.00)	(0.02)			0.02	0.01
Total assets		131,193	123,861	7,332	6	131,193	123,861	7,332	6

* Adjusted EBITDA is EBITDA before gains or losses on foreign exchange, earn-out provisions related to acquisitions, costs directly attributable to acquisitions, stock-based compensation transactions and management restructuring costs.

Financial Highlights - Three months ended September 30, 2014

• Total revenues grew 13% quarter-over-quarter to $17.1 million.
  • Equipment sales (35% of total) increased 34% related to a contract in Mexico.
  • Inspection services (37% of total) decreased 7% primarily related to the timing of commencement of projects where activity is expected to increase in the fourth quarter.
  • Consulting services (15% of total) increased 11%, mainly in Australia.
  • Monitoring, licensing and technical support (13% of total) increased 43% from new licensing contracts with North American oil and gas pipeline operators.
• Total operating expenses increased 37% over the prior period to $14.3 million. Excluding costs related to acquisitions and management restructuring, total operating expenses are up 30%.
  • Marketing expenses (20% of total) up 14% due to increased business development activities.
  • Engineering and operations expenses (47% of total) up 58% mainly due to the hiring of technical personnel to support existing and future activity, resulting in higher revenue and work in progress. Some of the increase reflects higher depreciation resulting from prior year equipment additions.
  • General and administrative expenses (29% of total) are up 28%, primarily due to the aforementioned acquisition and one-time management restructuring costs and increased consulting costs.
• Gross margin of 82% compared to 76% for the same period last year partially due to a higher proportion of monitoring, licensing and technical support sales, as well as reduced flow through costs.
• Adjusted EBITDA of $2.1 million and a loss of $0.2 million, compared to adjusted EBITDA of $2.7 million and a loss of $0.8 million last year. Adjusted EBITDA has declined as the Company has been putting in place the required human and organizational infrastructure required to support projects in backlog and future growth.
• Financial position remains strong, with net working capital at September 30, 2014 of $74.4 million; including $40.6 million in cash.

Financial Highlights - Nine months ended September 30, 2014

• Total revenues increased 15% over the prior nine-month period to $50.2 million due to the same reasons stated for the three-month period and below.
  • Equipment sales (25% of total) grew 64% reflecting a number of significant equipment supply contracts, mainly in the Americas region.
  • Inspection services (46% of total) declined 10%.
  • Consulting services (17% of total) increased by 40%.
  • Monitoring, licensing and technical support (12% of total) increased by 38%.
• Total operating expenses increased 24% over the prior period to $39.1 million. Excluding the costs stated in the three-month period above, total operating expenses are up 22%.
  • Marketing expenses (22% of total) up 19%.
  • Engineering and operations expenses (44% of total) up 32%.
  • General and administrative expenses (31% of total) up 20%.
• Gross margin remained consistent at 77% compared to 78% for the same period last year.
• Adjusted EBITDA of $7.0 million and profit of $0.8 million, compared to adjusted EBITDA of $8.6 million and profit of $0.3 million last year. The decline in adjusted EBITDA reflects the reasons stated for the three-month period.

Business, Operations & Outlook

Project backlog remains high at over $80 million, not including yearly recurring revenues of greater than $8 million per year from pipeline monitoring, licensing and technical support as at September 30, 2014. Work on existing contracts continued during the quarter along with the planning of several projects to be carried out during the fourth quarter. The last three-month period of each year is historically the busiest period for the Company.

Major water utility customers continue to adopt Pure's proactive assessment strategies to understand the current condition of their pipelines and to improve service life. During the quarter, the City of Baltimore selected Pure to lead a five-year program, worth up to US$20 million, to assess their large-diameter water transmission pipelines with a renewal option for an additional five years. Contract negotiations are currently underway; once finalized, the award amount will be included in backlog with work expected to begin in 2015.

During the quarter, Pure announced the acquisition of HM, a leading provider of technology-driven integrity services to the oil and gas pipeline industry. By combining the technologies and services of HM and Pure, the Company believes it has an unparalleled solution set for oil and gas pipeline owners. Pure estimates that 70% of oil and gas pipelines lack the infrastructure required to accept traditional in-line inspection tools, creating a significant market opportunity for the Company's SmartBall^® leak detection system, including its enhanced pipe wall assessment capability. Pure expects the acquisition will be a catalyst for rapid expansion into the oil and gas pipeline inspection industry through an expanded customer base, contributing to overall growth moving ahead. HM's business will be reflected in the Company's fourth quarter results.

Pure made additional investments during the quarter through the hiring of technical personnel and for ongoing improvements to its internal processes. The investments will allow the Company to manage existing contracts, maximize internal efficiencies and promote rapid growth in its key markets.

Quarterly Dividend

The Company's Board of Directors has declared a quarterly dividend of $0.03 per common share ($0.12 per common share annualized), payable on December 15, 2014 to shareholders of record on November 28, 2014.

The Company hereby notifies all shareholders that the dividend payable on December 15, 2014 will be designated as an "eligible dividend" for Canadian income tax purposes pursuant to subsection 89(14) of the Income Tax Act (Canada).

Conference Call and Webcast

A teleconference will be held to discuss these results on November 7, 2014, at 10:30 am ET. 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 1-888-231-8191 (within North America) and 647-427-7450 (Local / International).

• Conference ID: 21249360
• A replay will be available approximately two hours after the call and will be available for two weeks. Access the replay by calling 1-855-859-2056 (toll-free within North America) or 416-849-0833 (Local / International). Use the following Passcode followed by the number sign: 21249360

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 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 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, 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, 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.

To find out more about Pure Technologies Ltd. (TSX: PUR), visit our website at www.puretechltd.com or contact Paul Moon, Investor Relations; [phone] or [email protected].

Related Links

http://www.puretechnologiesltd.com