Pure Technologies Announces First Quarter 2016 Results

CALGARY, May 3, 2016 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announced its financial performance for the quarter ended March 31, 2016.

First Quarter Highlights:

• Revenue: $25.1 million, up 71% from 2015.
  • Organic growth of 35%; excludes $4.2 million from Wachs Water Services ("WWS", acquired April 1, 2015) and foreign exchange impact.
  • PureHM revenue (Pure's oil and gas pipeline integrity business) grew to $4.7 million from $1.4 million in 2015.
• Adjusted EBITDA of $1.1 million compared to an Adjusted EBITDA loss of $2.1 million last year.
• Adjusted loss improved to a loss of $1.5 million in the quarter from a $3.9 million loss last year.
• Growth and Cost Optimization plan positively impacting overall results.
  • Previously announced $6-8 million in annualized operating cost efficiencies expected by the end of 2016 without impacting Pure's ability to continue growing its business.
  • Approximately $1 million in cost efficiencies were realized in the first quarter.

"We are pleased with Pure's first quarter performance which has improved dramatically compared to the same three months last year," said Jack Elliott, President and CEO of Pure. "These early results, driven largely by our Growth and Optimization plan set in motion late last year, set a positive tone for the remainder of 2016. Overall, our efforts to diversify Pure into natural adjacencies to its core business are starting to translate into significant benefits for the Company. The secular trends inherent in the water and oil and gas infrastructure sectors will continue to benefit Pure and its stakeholders in 2016 and beyond."

Financial Highlights for the Three Month Period Ended March 31, 2016
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 March 31		2016	2015	$ Change	% Change
Revenue		25,121	14,666	10,455	71
Cost of sales		6,249	3,958	2,291	58
Gross margin		18,872	10,708	8,164	76
Gross margin (%)		75	73		-
Operating expenses^1		21,111	15,883	5,228	33
Adjusted EBITDA^2		1,108	(2,085)	3,193	153
Adjusted EBITDA^2 (%)		4	(14)
Loss for the year		(2,458)	(2,304)	(154)	(7)
	Per share – basic	(0.05)	(0.04)
	Per share – diluted	(0.05)	(0.04)
Cash flow from operations before working capital changes^2		1,119	(1,302)	2,421	186
Adjusted loss for the period^2		(1,488)	(3,896)	2,408	62
Total assets^3		139,037	147,080	(8,043)	(5)

1.	Excludes Libya accounts receivable and loss or gains on asset disposals
2.	See Non-GAAP Measures.
3.	Comparative figure is as at December 31

• For the quarter, revenue increased by 71% to $25.1 million from $14.7 million in 2015.
  • Revenue increased as a result of organic growth and the inclusion of $4.2 million of revenue from WWS.
• Gross margin of 75% compared to 73% in in the same period in 2015.
  • Q1/16 had a higher proportion of inspection and consulting revenues (lower direct costs) while Q1/15 included a lower margin equipment sale which did not recur.
• Operating expenses, excluding gains on asset disposal and changes in provisions, for the first quarter were $21.1 million compared to $15.9 million for 2015. The majority of the increase reflects:
  • Incremental costs attributable to the WWS business – $3.9M; weakening Canadian dollar – $0.4M; incremental hourly labour costs in PureHM to deliver higher work volumes – $0.7M; higher marketing costs (as a result of new hires) and depreciation on account of prior period investments – $0.7M; offset by $1M in cost efficiencies realized in the quarter.
• Adjusted EBITDA of $1.1 million in Q1/16 compared to an Adjusted EBITDA loss of $2.1 million in Q1/15
• Adjusted loss improved to a loss of $1.5 million in the quarter from a $3.9 million loss last year for the reasons stated above.

Outlook

Pure's business is impacted by the seasonal nature of its work in North America, particularly in the first quarter which is historically the slowest period due to winter weather and client scheduling challenges. Activity in North America is expected to increase in the second and subsequent quarters driven by municipal project schedules and improvements in weather.

In the Americas region, accounting for 72% of revenue for the quarter, revenues grew by 77% over 2015, including the contribution from WWS, acquired in Q2/15. Excluding the impact of foreign exchange and WWS, the region grew by 26% over 2015, primarily driven by a 40% increase in inspection and consulting services. Inspection and consulting revenues in the Americas are expected to increase in 2016 due to organic growth and improved project execution.

WWS expands Pure's services towards a full network management offering, including valve, hydrant and non-revenue water (NRW) services and broadens Pure's customer base to include more small and medium sized utilities. The combination of Pure and WWS forms the platform for significant growth in 2016 and beyond. Specific efforts to refocus the business development activities combined with the elimination of certain administrative cost redundancies in mid-2016 are expected to result in improved performance in 2016 compared to 2015. 

Internationally, Pure continues to build a foothold in key strategic markets as several regions turn their attention towards the benefits of condition assessment over capital replacement. International revenues decreased $0.8 million from 2015 mainly as a result of the first quarter of 2015 including a $1 million AFO sale to the Company's joint venture in China.  Management expects full year increases in international sales, subject to the execution of significant scheduled projects in Europe and South America in the second half of 2016.

The Company continues to capitalize on its PureHM acquisition, Pure's fastest growing business segment, which grew revenues to $4.7 million in the first quarter of 2016 from $1.4 million in the prior year. The increase results from the elimination of contracting delays, increased work in the U.S. offsetting the seasonality of the Canadian business, and increased product acceptance for both the Spectrum XLI and SmartBall technologies for the oil and gas pipeline sector.

The Company continues to invest in research and development initiatives that are focused on increasing the capability and efficiency of Pure's technology platforms in both the water and oil and gas pipeline sectors. Pure anticipates commercialization of several of these initiatives in late 2016 and 2017 with corresponding positive impacts on revenue and profitability. 

Conference Call and Webcast

A teleconference and webcast will be held tomorrow morning, May 4, 2016, at 10:30 am EDT. Senior Management will speak to the results and provide a financial and business update.  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. 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: 00436

Webcast & Presentation Slides:  Investors will be able to listen to the conference over the Internet as well as access presentation slides (in pdf format) 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 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 relating to the benefits expected to be realized from the Company's Growth and Cost Optimization Plan, integration of recent acquisitions, 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, the Company's ability to successfully implement its Growth and Cost Optimization Plan, 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.

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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, Director of Investor Relations; [phone] or [email protected].