Pure Technologies Ltd. announces results for third quarter ended September
30, 2009
Total revenues were
There is continued exposure to foreign exchange losses with
Gross margins continue to be strong at 67% for the quarter and 68% year-to date.
Our branch office in
We continue to work on the Washington Suburban Sanitary Commission (WSSC) contract, which is contributing to all four revenue streams. According to a recent press release by WSSC, AFO is planned for all 77 miles of their large diameter prestressed concrete pipes over the next few years.
Our first un-manned robotic P-Wave inspection was completed during the quarter and this technology will continue to expand our product line.
Current indications are for a strong fourth quarter, although this will depend on the timing of anticipated contract awards. Confirmed backlog is in excess of
Financial Highlights
Revenues decreased by 18% in the third quarter compared to the same period in 2008, but year to date revenues have increased by 16%. While the third quarter is typically the lowest revenue-generating quarter, work continued on projects that will be delivered in the fourth quarter and in 2010. Equipment sales have shown a decrease of 74% for the quarter while year to date the decrease is 9%. The third quarter of 2008 included the delivery and installation an AFO system while there were no deliveries of AFO systems in the third quarter of 2009. Scheduled deliveries for the third quarter were postponed and are expected to be delivered in the fourth quarter. Revenue recognition of equipment sales is dependent upon the delivery of the equipment making the quarterly revenue somewhat volatile. The year to date revenue is a better indicator of the performance. Inspection service revenue increased from the third quarter of 2008 (111%) and on a year to date basis (14%). SmartBall continues to gain traction in leak detection, and the first use of the robotics equipment purchased from Pipe Eye facilitated an unmanned P-Wave inspection in
Revenue from monitoring and technical support increased by 80% for the quarter and has increased 59% year to date. With the additions to the installed base of AFO and SoundPrint systems, this revenue source continues to increase each year. Work continues on the installation and commissioning of the systems sold in 2007 and 2008 to
No revenue or expenses have been recorded from the acquisition of Jason Consultants Ltd. and Jason Consultants LLC due to the timing of the close of the transaction. These companies will begin their contributions in the next quarter.
The largest growth in revenue continues to be in the US market. While the
Gross profit decreased by 1% for the quarter and increased by 29% on a year to date basis. Gross margin was 67% in the third quarter of 2009 compared to 56% in 2008. Year to date margin for 2009 is 68% compared to 62% in 2008. All product lines continue to deliver target margins with only slight deviations from quarter to quarter. Our design engineers continue to work on improved processes to ensure that the delivery and installations of our products and technologies are cost efficient to ensure the sustainability of our margins.
Marketing expenses for the quarter have increased by 28% over the third quarter of 2008 and have increased 34% year to date. Increased staffing and increased presence in the international market has caused the increase. This quarter has seen the registration and establishment of a branch office in
Engineering and operations expenses have increased by 56% over the third quarter of 2008 and 99% year to date. As a percentage of revenue, these expenses have grown from 9% to 15% year to date. We have expanded our operations and engineering group over the last year and a half as a result of the rapid expansion in our revenues. Training is a critical component of our operations group and new personnel are trained for 3 to 6 months before they are qualified for projects in the field. Consulting and inspection services are heavily dependent on labor and as we increase these areas of revenue, operation expenses will be affected. As a percentage of revenue, however, these expenses will level off in 2010. As well, PBUK expenses are included for all of 2009 figures while only five months are included in the 2008 figures. Engineering and operations expenses have been consistent throughout the three quarters of 2009.
General and administrative expenses for the quarter have increased 2%. Year to date expenses have increased by 30%. The year to date increase is due to inclusion of PBUK. As a percentage of revenue, these expenses have grown from 22% to 24% year to date. This ratio should decline in the next quarter as has been the case over the prior two quarters in 2009.
Research and development expenses increased for the quarter by 124%. Year to date expenses have increased by 15%. In the third quarter of 2008,
Depreciation and amortization for 2009 increased by 27% compared to the third quarter of 2008 and 23% year to date. The rise in depreciation and amortization expense reflects capitalization of development costs in 2008 as well as the amortization of intangible assets on the acquisition of PBUK. The Company changed its accounting estimate of computer hardware for depreciation purposes from 5 years to 3 years effective
EBITDA for the third quarter decreased 233% compared to 2008. Year to date, EBITDA has decreased by 22%. In preparing for the increase in forecasted work throughout 2009 and 2010, expenses have increased in the year. With the lower revenues in the third quarter, EBITDA has been significantly affected in the quarterly comparison. On a year to date basis, while there has been a decrease, it is not as dramatic. It is expected that the fourth quarter will be significantly stronger than the third quarter, reversing the trend.
2009 Q3 Financial Highlights
(unaudited)
Consolidated Three months ended: Nine months ended:
Statement of September September September September
Operations 30, 2009 30, 2008 30, 2009 30, 2008
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Equipment sales $ 680,000 $ 2,610,000 $ 9,279,000 $ 10,151,000
Inspection services 783,000 372,000 2,472,000 2,175,000
Consulting services 1,323,000 1,139,000 4,257,000 2,068,000
Monitoring & technical
support 1,092,000 607,000 2,799,000 1,756,000
------------ ------------ ------------ ------------
Total revenue 3,878,000 4,728,000 18,807,000 16,150,000
Cost of sales 1,268,000 2,091,000 5,945,000 6,216,000
Marketing 983,000 768,000 3,066,000 2,295,000
Engineering and
operations 922,000 592,000 2,751,000 1,380,000
General and
administrative 1,471,000 1,441,000 4,582,000 3,525,000
Research and
development 451,000 201,000 1,033,000 898,000
Depreciation and
amortization 356,000 281,000 1,006,000 820,000
Foreign exchange
(gain) loss 704,000 20,000 1,298,000 248,000
Interest income (22,000) (99,000) (78,000) (296,000)
------------ ------------ ------------ ------------
Income (loss) from
continuing operations
before tax (2,255,000) (567,000) (796,000) 1,560,000
Income taxes 35,000 68,000 63,000 81,000
------ ------ ------ ------
Net income (loss) (2,290,000) (635,000) (859,000) 1,479,000
Income (loss) per
share - basic $ (0.07) $ (0.02) $ (0.03) $ 0.05
- diluted $ (0.07) $ (0.02) $ (0.03) $ 0.04
Weighted avg. shares
- basic 33,426,164 32,678,359 33,186,695 32,442,602
- diluted 33,426,164 32,678,359 33,186,695 32,938,737
(unaudited) As at As at
Consolidated Balance Sheet September December
30, 2009 31, 2008
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Assets
Current assets
Cash and cash equivalents $ 18,410,000 $ 20,204,000
Accounts receivable 8,672,000 7,458,000
Inventory 2,285,000 1,386,000
Prepaid expenses 362,000 848,000
Net investment in lease 78,000 87,000
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29,807,000 29,983,000
Property and equipment 2,635,000 2,487,000
Goodwill 2,393,000 1,849,000
Intangible assets 1,605,000 1,754,000
Net investment in lease 58,000 131,000
Other assets - 28,000
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$ 36,498,000 $ 36,232,000
Liabilities and Equity
Current liabilities
Accounts payable $ 1,854,000 $ 2,266,000
Deposits on sales contracts 146,000 112,000
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2,000,000 2,378,000
Future income taxes 162,000 196,000
Shareholders' equity
Share capital 45,539,000 44,102,000
Contributed surplus 1,321,000 1,179,000
Accumulated other comprehensive income (loss) (101,000) (59,000)
Deficit (12,423,000) (11,564,000)
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$ 36,498,000 $ 36,232,000
About Pure Technologies Ltd.
Pure Technologies Ltd. is an international technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure operates from its headquarters in
Forward-Looking Statements
This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words believes, expects, anticipates, estimates, intends, plans, or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators (www.sedar.com).
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For further information: To find out more about Pure Technologies Ltd. (TSX-V: PUR), visit our website at www.puretechnologiesltd.com, contact James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794, or e-mail to: [email protected].
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