- Record Quarter over Quarter earnings increase of 75% -
TORONTO, Nov. 3 /CNW/ - CriticalControl Solutions Corp., (TSX-V:CCZ) today reported its third quarter financial results for the three months ended September 30, 2008. (All dollar amounts are expressed in thousands unless otherwise stated):
<< Highlights for the quarter included (Q3 2008 compared to Q3 2007): - 17% increase in total revenue to $6,699 in 2008 from $5,709 in 2007; - 36% increase in total gross margin to $3,700 in 2008 from $2,727 in 2007; - 15% increase in gross margin as a percentage of revenue to 55% in 2008 from 48% in 2007; - Significant increase in net income to $1,232 in 2008 compared to net income from continued operations of $27 in 2007; - Gained more than 500 metering points with the acquisition of SCADANet from Matrikon Inc.; - Completed the purchase and cancellation of 6,654,000 common shares for $1,055 through a normal course issuer bid. >>
"The organic growth of our business in both our Government and Energy units has resulted in strong operating results on a year over year basis and a 7% growth in revenue, 9% increase in gross margin and 75% increase in net income over Q2 2008," said Alykhan Mamdani, President and CEO of CriticalControl. "Despite the recent dramatic slowdown in the global economy, management anticipates that the Corporation's net income for 2008 will exceed $3.1 Million."
Financial Review (in thousands):
Third Quarter Fiscal 2008 Financial Review:
Total revenue was $6,699 for the three months ended September 30, 2008 compared to $5,709 for the same three month period in 2007, an increase of $990 or 17%.
Revenue from the Energy sector was $2,996 for the three months ended September 30, 2008 compared to $2,800 for the same three month period in 2007, an increase of $196 or 7%. Recurring revenue from the Corporation's Measurement Operations offering, which includes recurring revenue from the Corporation's gas chart integration business based on ScanGas and its fluid analysis management application ProTrend, increased by 12% in the third quarter of 2008 compared to 2007. The Company's web-SCADA application, Netflow, saw its third quarter 2008 overall revenue reduce by 2% to $1,183 compared to $1,206 in 2007. While hardware sales during the quarter decreased by 13%, recurring revenue during the quarter increased by 12%. The newly acquired SCADANet customers contributed revenue of $127 during the three months ended September 30, 2008.
As a result of strong organic growth, revenue from the Government sector was $3,703 for the three months ended September 30, 2008 compared to $2,909 for the same three month period in 2007, an increase of $794 or 27%.
Gross margin as a percentage of revenue increased to 55% for the three months ended September 30, 2008 compared to 48% for the same three month period 2007, an increase of 15%.
Gross margin as a percentage of revenue for the Energy sector increased to 67% for the three months ended September 30, 2008 compared to 54% for the same three month period in 2007, an increase of 24%. Cost of revenue for the Corporation's offering in the energy sector continued to drop in the third quarter of 2008 due to the Corporation's investment in technology that has resulted in marked improvement in its gas chart reading processes and software.
Gross margin as a percentage of revenue for the Government sector increased to 46% for the three months ended September 30, 2008 compared to 42% for the same three month period in 2007, an increase of 10%. Cost of revenue for the Corporation's offering in the government sector increased in line with revenue.
Selling and administrative expenses ("SG&A") was $1,875 for the three months ended September 30, 2008 compared to $1,706 for the same three month period in 2007, an increase of $169 or 10%. 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 Edmonton.
The Energy sector SG&A for the three months ended September 30, 2008 was $594 compared to $616 for the same three month period in 2007. These costs were contained due to reduced associated management requirements.
The Government sector SG&A expenses increase by to $672 for the three months ended September 30, 2008 from $599 for the same three month period in 2007 due primarily to the Corporation's expanded new office space in Edmonton housing its expanded service bureau facility.
Interest, contract losses and other expenses (including restructuring charges) decreased significantly to $28 for the three months ended September 30, 2008 compared to $350 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 and a reduction in overall debt.
The Corporation's net income for the three months ended September 30, 2008 was $1,232 compared to net income from continued operations of $27 for the same three month period in 2007. The increase was primarily due to increased revenue and improved margins compared to the same period in 2007.
The Corporation's working capital position changed significantly to $2,198 at September 30, 2008 from $(85) for the same three month period in 2007.
Nine month 2008 Financial Review:
Total revenue was $18,947 for the nine months ended September 30, 2008 compared to $17,595 for the same period in 2007, an increase of $1,352 or 8%.
Revenue from the Energy sector was $8,269 for the nine months ended September 30, 2008 compared to $8,094 for the same in 2007, an increase of $175 or 2%.
Revenue from the Government sector was $10,678 for the nine months ended September 30, 2008 compared to $9,501 for the same in 2007, an increase of $1,177 or 12%. Revenue growth from the Government Sector was led by increased demand for the Corporation's Imaging Service Bureau which resulted in imaging revenue growing at 20% to $7,561 in the nine months ended September 30, 2008 compared to $6,318 in the same period last year. New pricing for the corporation's long term government contract also came into effect aiding the revenue growth of the sector. This growth was partially 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 strong increase in revenue, gross margin and bottom line profitability for the sector.
Gross margin as a percentage of revenue was 54% for the nine months ended September 30, 2008 compared to 47% for the same period in 2007, an increase of 7%.
Selling and administrative expenses ("SG&A") was $6,104 for the nine months ended September 30, 2008 compared to $5,401 for the same period in 2007, an increase of $703 or 13%.
Interest, contract losses and other expenses (including restructuring charges) decreased significantly to $83 for the nine months ended September 30, 2008 compared to $926 for the same period in 2007.
The Corporation's net income for the nine months ended September 30, 2008 was $2,438 compared to $155 for the same period in 2007.
Subsequent Event:
On October 1, 2008 the Corporation acquired the business and assets of Western Corrosion Technologies ("WCT") for $525,000. The acquired business of WCT includes a service to assist gas producers in mapping their gas wells and the system of interconnected pipelines that connect to gas plants. The assets include PipeWatch, a Web-based tool which allows producers to view schematics through a geographic-information-system-based map. The acquisition will be immediately accretive and increases the value provided to customers for each meter, which is the basis of the management's strategy to drive growth in 2009 and beyond. The acquisition of WCT's assets is expected to add over $1 Million in revenue to CriticalControl in 2009.
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 $507 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.
With the recent acquisition of the business and certain assets of Western Corrosion Technologies, 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 a pickup in exploration activity in the Western Canadian Sedimentary Basin, which management originally anticipated to occur in the first half of 2009. Given the lack of liquidity in the capital markets and the current global economic crisis, Management expects capital expenditures in 2009 to be curtailed for the immediate future. As such, Management does not expect a pickup in exploration activity in the Western Canadian Sedimentary Basin until at least mid 2010.
<< Services Provided to Active Measurement 2008 2007 Points at the end of ------------------------------------ each Quarter Q3 Q2 Q1 Q4 ------------------------------------------------------------------------- Chart Recorders - Measurement (meters) 30,205 30,304 31,087 31,001 Electronic Flow Measurement Devices - Measurement and Control 3,076 2,475 2,411 2,300 "Fluid Composition Management - Total Analyses" 81,393 80,764 67,029 60,240 ------------------------------------------------------------------------- Services Provided to Active Measurement 2007 2006 Points at the end of ------------------------------------ each Quarter Q3 Q2 Q1 Q4 ------------------------------------------------------------------------- Chart Recorders - Measurement (meters) 30,038 29,273 29,849 32,065 Electronic Flow Measurement Devices - Measurement and Control 2,269 2,224 2,210 2,013 "Fluid Composition Management - Total Analyses" 53,619 49,006 40,564 34,006 ------------------------------------------------------------------------- >>
Strong growth in Electronic Flow Measurement Devices monitored was due to approximately 500 meters being added from the acquisition of SCADANet on July 1, 2008. Reduced growth in the number of active meters added for Fluid Composition Management reflects 4,500 non active meters deleted from the system due to the Corporation's change in pricing from an annual license fee to per meter pricing. This pricing change has resulted in inactive meters being removed from the system by the Corporation's historic customers as they are transitioned to new pricing.
The Company's 2008 third quarter financial statements and management's discussion and analysis for the three months ended September 30, 2008 are posted on www.criticalcontrol.com.
We seek safe harbour.
About CriticalControl:
CriticalControl Solutions Corp. 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: 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