|By Marketwired .||
|November 6, 2012 09:09 PM EST||
CALGARY, ALBERTA -- (Marketwire) -- 11/07/12 -- CriticalControl Solutions Corp. (TSX:CCZ) today reported its financial results for the three and nine months ended September 30, 2012.
"The third quarter is historically our weakest quarter of the year," said Alykhan Mamdani, President & CEO of CriticalControl. "Given our continued investment in R&D and expected increased revenue from the strategic selling success associated with all parts of our business, we anticipate returning to our historic levels of profitability in 2013."
Quarter ended September 30, 2012 highlights
-- Total revenue of $11.2 million in Q3 2012 ($36.0 million year-to-date) represents a 9% decrease (3% year-to-date) from the same period in 2011. -- Revenue from the Canadian Energy Services business increased by 14%, to $3.0 million in Q3 2012 from $2.7 million in Q3 2011, resulting from the acquisitions of Vertex in Q4 2011 and DGL early in Q1 2012. Year-to-date revenue increased by 14% from $8.4 million in 2011 to $9.6 million in 2012. -- Revenue from the US Energy Services business decreased by 7%, to $4.5 million in Q3 2012 from $4.8 million in Q3 2011. Year-to-date revenue increased by 5% from $12.9 million in 2011 to $13.6 million in 2012, driven by $1.4 million of primarily organic growth in recurring revenue, offset by a $0.7 million decline in fabrication, assembly and equipment revenue. -- Revenue from the Corporation's Service Bureau Operations decreased by 24%, from $4.9 million in Q3 2011 to $3.7 million in Q3 2012. Year-to- date revenue decreased by 19% from $15.9 million in 2011 to $12.9 million in 2012. The revenue decrease is primarily attributable to the completion of two large imaging projects in Q3 2011.
Gross margin percentage
-- Gross margin percentage for the Corporation increased slightly to 36.4% in Q3 2012 from 35.2% in Q3 2011 (year-to-date increased to 36.8% from 36.2%). -- Canadian Energy Services gross margin percentage declined from 66.6% in Q3 2011 (year-to-date 63.3%) to 59.5% in Q3 2012 (year-to-date 56.9%), primarily attributable to lower margins associated with the DGL and Vertex acquisitions, economic factors putting pressure on gas producers, and increasing labour costs. -- US Energy Services gross margin percentage increased from 23.9% in Q3 2011 to 27.0% in Q3 2012 (year-to-date increased from 24.4% to 27.3%). The increase was driven by a focus on recurring revenue, pricing initiatives and cost control. -- Service Bureau Operations gross margin percentage remained relatively flat at 29.0% in Q3 2012 compared to 29.2% in Q3 2011 (year-to-date 31.8% in 2012 compared to 31.5% in 2011).
Selling and administrative expenses
-- Selling and administrative expenses for the Corporation decreased by $207,000 for the quarter in comparison to 2011 despite the additional expenses associated with the acquisitions of DGL and Vertex. On a year- to-date basis, selling and administrative expenses increased slightly. -- Selling and administrative expenses for the Canadian Energy Services business increased in Q3 2012 compared to 2011 by $193,000 ($481,000 year-to-date) primarily related to increased sales, marketing and business development activities in Q1 and Q2; facility costs related to acquisitions; and strategic hires. -- Selling and administrative expenses for the US Energy Services business increased in Q3 2012 compared to 2011 by $35,000 ($342,000 year-to-date) primarily due to increased staffing to position the business for growth, increased infrastructure costs, and increased sales and marketing activities. -- Selling and administrative expenses for the Service Bureau Operations decreased in Q3 2012 compared to 2011 by $188,000 ($434,000 year-to- date) primarily due to continued streamlining and integration of operations, and reduced sales and marketing expenses. -- Selling and administrative expenses for Corporate decreased in Q3 2012 compared to 2011 by $247,000 ($375,000 year-to-date) primarily attributable to non-recurring costs in 2011, reduced staffing, and reduced reliance on consultants.
Other operating expenses
-- Other operating expenses increased from $38,000 in Q3 2011 to $246,000 in Q3 2012 due to the loss on disposal of leasehold improvements resulting from moving locations in Winnipeg. The impact on earnings before income tax was offset by an income inclusion related to the reversal of deferred lease inducements associated with the terminated lease. On a year-to-date basis, the increase in other operating expenses was even higher ($432,000) because of favorable estimate changes netted with the 2011 expenses that did not recur in 2012.
-- Net earnings for the quarter when compared to Q3 2011 decreased by $407,000 to a net loss of $130,000. Of the decrease, $106,000 (net of income tax) is attributable to foreign exchange losses. Year-to-date net earnings decreased by $778,000 to $240,000.
Cash flow and balance sheet
-- Working capital decreased by $0.7 million from $4.4 million at December 31, 2011 to $3.7 million at September 30, 2012. -- For the nine months ended September 30, net cash from operating activities increased by $0.9 million from $1.3 million in 2011 to $2.2 million in 2012. -- Total loans and borrowings, net of cash, decreased by $0.9 million from December 31, 2011 to September 30, 2012 despite an additional $1.0 million of debt incurred related to the DGL acquisition.
Reduced revenue from the Corporation's Service Bureau Operations is attributable to the completion of two major projects that were not replaced in 2012. Subsequent to the end of Q3 2012, the Corporation executed a master services agreement with a Schedule A Bank in Canada for the outsourced handling of certain business processes on an ongoing basis. The original term of the contract is three years. The ongoing revenue from this contract is expected to increase profitability of the Service Bureau Operations by Q2 2013 to the level experienced in 2011 based on a projected volume of documents. There can be no assurance that the volume of documents will meet management's expectations, and the agreement does not guarantee such volumes. In addition, ramp-up and delivery of such a contract is subject to certain risks that may affect overall profitability of the contract.
The Corporation has downsized its Winnipeg operations, which has resulted in reduced rent of approximately $20,000 per month starting in September 2012. Costs of downsizing such operations were recognized in the first three quarters of 2012, offset in part by a one-time benefit from the reversal of deferred lease inducements no longer applicable to the Winnipeg operations.
Gas prices remained weak during 2012, resulting in an escalation in the shut-in of low production gas wells during this period, putting additional downward pressure on the Corporation's historic revenue streams. Management undertook an ambitious expansion of its technologies in its Canadian Energy Services business in late 2011 in order to offset the decreased revenue caused by the shut-ins. This effort is based on transforming the Corporation's core volumetric business (consisting of managing gas measurement and composition production data) into a full scale system to manage oil and gas production data from the well-head to the financial accounting system. The expansion includes management of oil related production data, and the management of production data in business processes within producers that use the data currently provided by the Corporation's solutions. This includes the acquisition of Vertex, which manages volumetric data through midstream operations, including the functions of daily allocations, production accounting and financial accounting. Additionally, the acquisition of assets from DGL early in 2012 resulted in the Corporation gaining the ability to manage the production accounting and financial accounting business processes of producers on an outsourced basis.
Management continues to focus on increasing recurring revenue from its measurement focused solutions in its US Energy Services business. Management expects to retain its increased levels of recurring revenue in its US Energy Services business, which combined with anticipated increased margins from fabrication will offset reduced revenue from its US fabrication business, which remains unpredictable. Notwithstanding the measures taken by management and the success experienced, continued weak commodity prices into 2013 will impact new exploration and, subsequently, the Corporation's revenue stream from its US Energy Services business.
The necessity of executing management's plan to offset declining revenue from its historic revenue base is even more essential given the reduced gas prices seen in 2012. The Corporation continues to increase its management costs and research & development costs to rewrite certain applications acquired by the Corporation and build out its suite of products. Unless the Corporation is successful in its current strategy, revenue from the Corporation's historic revenue streams will diminish significantly, which will impact profitability.
Notwithstanding these additional costs, the increased associated sales and marketing costs already being incurred, and the price of natural gas being significantly lower than previously predicted, management is optimistic that its efforts will bear fruit by increasing revenue in 2013 to offset revenue losses from the shut-in of less productive wells, and to pay for the Corporation's increased costs. Management's plan, if successful, will result in revenue and profit growth in 2013.
Forward looking statements
Management's expectation on increasing profitability in the Corporation's Service Bureau Operations business is dependent upon a contract with a Schedule A Bank in Canada. The expected revenue from this contract is based upon certain volumes represented in a request for proposal issued by the bank, but is not guaranteed under the master services agreement. The statement of work with the bank is currently being negotiated and actual revenue may differ from management's current expectations.
The Corporation's fabrication, assembly and equipment business is now geared towards larger equipment used in shale gas production, the continued development of which is dependent upon the financial viability of gas production in the Marcellus shale play. The financial viability of gas production in the Marcellus shale play is not yet predictable and can only be proven with the passage of time.
Expected profitability in the Corporation's US operations will be dependent upon the acceptance of the Corporation's clients in the US of the Corporation's technologies, and general economic conditions including the price of natural gas, neither of which can be assured or predicted.
The Corporation has undertaken a strategic direction to penetrate further into the Corporation's client base in Canada with integrated technologies. There can be no assurance of client acceptance of this strategy, nor can there be assurance that the Corporation will be successful in the integration of its current technologies with those that have been recently acquired.
The continued decline in gas prices during 2012 has had a negative impact on the Corporation's recurring revenue. Representations have been made that the current growth in the Corporation's business is offsetting the decline. The pace of shut-in of non-profitable wells is not predictable in the current economic climate. Should the number of wells being shut-in increase, management's guidance will be negatively impacted.
In a world of escalating globalization, with an increasingly transient workforce, enterprises are constrained from maintaining their knowledge and are forced to focus on their key market advantages to remain competitive. CriticalControl provides these enterprises with secure and cost effective solutions for the completion of document and information intensive business processes through an integrated offering of software, outsourced services and optimized business processes.
CriticalControl Solutions Corp.
President & CEO
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
Oct. 28, 2016 12:15 PM EDT Reads: 1,296
President Obama recently announced the launch of a new national awareness campaign to "encourage more Americans to move beyond passwords – adding an extra layer of security like a fingerprint or codes sent to your cellphone." The shift from single passwords to multi-factor authentication couldn’t be timelier or more strategic. This session will focus on why passwords alone are no longer effective, and why the time to act is now. In his session at 19th Cloud Expo, Chris Webber, security strateg...
Oct. 28, 2016 12:02 PM EDT
As companies adopt the cloud-to-streamline workflow, deployment hasn’t been very seamless because of IT concerns surrounding security risks. The cloud offers many benefits, but protecting and securing information can be tricky across multiple cloud providers and remains IT’s overall responsibility. In his session at 19th Cloud Expo, Simon Bain, CEO of SearchYourCloud, will address security compliance issues associated with cloud applications and how document-level encryption is critical for sup...
Oct. 28, 2016 12:00 PM EDT Reads: 427
In past @ThingsExpo presentations, Joseph di Paolantonio has explored how various Internet of Things (IoT) and data management and analytics (DMA) solution spaces will come together as sensor analytics ecosystems. This year, in his session at @ThingsExpo, Joseph di Paolantonio from DataArchon, will be adding the numerous Transportation areas, from autonomous vehicles to “Uber for containers.” While IoT data in any one area of Transportation will have a huge impact in that area, combining sensor...
Oct. 28, 2016 12:00 PM EDT Reads: 1,227
SYS-CON Events announced today that Tintri Inc., a leading producer of VM-aware storage (VAS) for virtualization and cloud environments, will present at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Tintri VM-aware storage is the simplest for virtualized applications and cloud. Organizations including GE, Toyota, United Healthcare, NASA and 6 of the Fortune 15 have said “No to LUNs.” With Tintri they manag...
Oct. 28, 2016 12:00 PM EDT Reads: 3,685
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, will discuss how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team a...
Oct. 28, 2016 12:00 PM EDT Reads: 935
DevOps is speeding towards the IT world like a freight train and the hype around it is deafening. There is no reason to be afraid of this change as it is the natural reaction to the agile movement that revolutionized development just a few years ago. By definition, DevOps is the natural alignment of IT performance to business profitability. The relevance of this has yet to be quantified but it has been suggested that the route to the CEO’s chair will come from the IT leaders that successfully ma...
Oct. 28, 2016 11:45 AM EDT Reads: 16,667
We are always online. We access our data, our finances, work, and various services on the Internet. But we live in a congested world of information in which the roads were built two decades ago. The quest for better, faster Internet routing has been around for a decade, but nobody solved this problem. We’ve seen band aid approaches like CDNs that attack a niche's slice of static content part of the Internet, but that’s it. It does not address the dynamic services-based Internet of today. It doe...
Oct. 28, 2016 11:30 AM EDT Reads: 2,107
Join IBM November 2 at 19th Cloud Expo at the Santa Clara Convention Center in Santa Clara, CA, and learn how to go beyond multi-speed it to bring agility to traditional enterprise applications. Technology innovation is the driving force behind modern business and enterprises must respond by increasing the speed and efficiency of software delivery. The challenge is that existing enterprise applications are expensive to develop and difficult to modernize. This often results in what Gartner calls...
Oct. 28, 2016 11:30 AM EDT Reads: 212
Although it has gained significant traction in the consumer space, IoT is still in the early stages of adoption in enterprises environments. However, many companies are working on initiatives like Industry 4.0 that includes IoT as one of the key disruptive technologies expected to reshape businesses of tomorrow. The key challenges will be availability, robustness and reliability of networks that connect devices in a business environment. Software Defined Wide Area Network (SD-WAN) is expected to...
Oct. 28, 2016 11:00 AM EDT Reads: 2,276
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
Oct. 28, 2016 11:00 AM EDT Reads: 360
Bert Loomis was a visionary. This general session will highlight how Bert Loomis and people like him inspire us to build great things with small inventions. In their general session at 19th Cloud Expo, Harold Hannon, Architect at IBM Bluemix, and Michael O'Neill, Strategic Business Development at Nvidia, will discuss the accelerating pace of AI development and how IBM Cloud and NVIDIA are partnering to bring AI capabilities to "every day," on-demand. They will also review two "free infrastruct...
Oct. 28, 2016 10:32 AM EDT Reads: 241
The Internet of Things (IoT), in all its myriad manifestations, has great potential. Much of that potential comes from the evolving data management and analytic (DMA) technologies and processes that allow us to gain insight from all of the IoT data that can be generated and gathered. This potential may never be met as those data sets are tied to specific industry verticals and single markets, with no clear way to use IoT data and sensor analytics to fulfill the hype being given the IoT today.
Oct. 28, 2016 10:30 AM EDT Reads: 2,957
@ThingsExpo has been named the Top 5 Most Influential M2M Brand by Onalytica in the ‘Machine to Machine: Top 100 Influencers and Brands.' Onalytica analyzed the online debate on M2M by looking at over 85,000 tweets to provide the most influential individuals and brands that drive the discussion. According to Onalytica the "analysis showed a very engaged community with a lot of interactive tweets. The M2M discussion seems to be more fragmented and driven by some of the major brands present in the...
Oct. 28, 2016 09:15 AM EDT Reads: 11,630
Fact: storage performance problems have only gotten more complicated, as applications not only have become largely virtualized, but also have moved to cloud-based infrastructures. Storage performance in virtualized environments isn’t just about IOPS anymore. Instead, you need to guarantee performance for individual VMs, helping applications maintain performance as the number of VMs continues to go up in real time. In his session at Cloud Expo, Dhiraj Sehgal, Product and Marketing at Tintri, wil...
Oct. 28, 2016 09:00 AM EDT Reads: 2,037