CALGARY, Nov. 5, 2015 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial results for the three and nine month periods ended September 30, 2015.

Third Quarter Highlights:

• Total revenue of $29.6 million, up 73% year-over-year;
  • Excluding Wachs Water Services ("WWS") and PureHM, Pure's revenue grew by 20% over 2014 (8% excluding the impact of foreign exchange);
  • Pure's oil & gas pipeline integrity business generated 15% of revenue in Q3/15, up from 8% a year ago;
  • Pure saw a 78% decline in equipment sales year-over-year due to project delays/timing, but reiterates that the Company's business is transitioning to a higher proportion of service-oriented revenue;
• Adjusted EBITDA of $3.9 million, up 83% year-over-year;
• Profit of $1.1 million compared to loss of $0.2 million a year ago;
• Cash flow from operations (before changes in non-cash working capital) of $3.5 million, up 117% over Q3/14;
• Cash on hand of $10.5 million, including restricted cash of $0.8 million, with no debt;
• Plan underway to realize between $6-8 million in annualized operating cost efficiencies by the end of 2016 without impacting Pure's ability to continue to grow its business. $2 million of this amount is expected to be achieved by early 2016.

"Over the past year, we have made significant progress establishing a foundation for growth in 2016 and beyond," said Jack Elliott, President and CEO of Pure. "Through the two acquisitions we completed in this period, we have broadened our service offerings and customer base within our core water and wastewater sectors, and we are generating strong growth in our oil & gas pipeline integrity business. While quarterly revenues are beginning to stabilize, we remain subject to some volatility due largely to seasonality and client-driven scheduling. The fourth quarter is normally Pure's strongest and, based on current visibility, this year will be no exception.  

"Importantly, as the next step in Pure's ongoing evolution, we have commenced implementation of a plan to optimize operational and administrative processes that we expect will result in total annualized cost savings of approximately $6-8 million by the end of 2016. Specific measures that have already been implemented will result in annualized cost savings of approximately $2 million commencing January, 2016."

Financial Highlights for the Three and Nine Month Periods Ended September 30, 2015
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).

1. Excludes Libya accounts receivable, other provisions, and loss or gains on asset disposals 
2. See Non-GAAP Measures as discussed in the third quarter Management's Discussion and Analysis
3. Comparative figure is as at December 31, 2014

• Total revenue for both the quarter and year-to-date periods benefitted from the WWS and PureHM acquisitions.
  • WWS provided $11.0 million of incremental revenue since its acquisition on April 1, 2015 ($5.6 million in Q3).
  • Oil & gas pipeline inspection revenues grew by $3.0 million (212%) and $8.1 million (278%) for the three and nine month periods, respectively, due primarily to the acquisition of PureHM on October 1, 2014.
• Excluding acquisitions, revenues grew 20% and 9% for the three and nine months, respectively.
  • Lower equipment sales and reduced activity in Mexico this year have been more than offset by increased inspection and consulting activity in the Americas as well as the impact of a strong US dollar on US based sales.
  • International inspection and consulting revenues grew 144% in Q3/15 and 21% year-to-date.
• Gross margins in both the quarter (72%) and year-to-date periods (73%) reflect a greater proportion of lower margin inspection and consulting revenues in 2015 compared to 2014, mainly due to pass through costs in Australia and the inclusion of lower margin revenues from WWS.
• The increase in operating expenses reflects:
  • $5.4 million and $12.9 million of incremental costs for the three and nine month periods, respectively, attributable to the PureHM and WWS businesses;
  • higher labour costs due to salaries of personnel hired in the second half of 2014 to support future growth;
  • the impact of a strengthening US dollar on our Canadian dollar overheads; and
  • $0.7 million of direct costs related to the WWS acquisition on a year-to-date basis, mainly incurred in Q2/15.
• For the third quarter, adjusted EBITDA increased by 83%, reflecting the increased revenue. A slow first quarter together with the above-noted decline in equipment revenue resulted in a slight reduction in adjusted EBITDA for the nine-month period.

Optimization Plan

Pure is in the process of implementing a plan to optimize its work force, administrative and project delivery costs by mid-2016. Annualized cost efficiencies of between $6-8 million are expected by the end of 2016. The execution of this plan is expected to result in a more focused and productive work force with the ability to deliver better service to Pure's customers, while ensuring continued growth an improved returns for its shareholders.

Specific actions are being undertaken in Q4/15 that are expected to result in annualized cost reductions of approximately $2 million commencing January 1, 2016. These measures, along with their annualized efficiency amounts, include:

• Reduction of employer matching of employee share purchases under its Employee Share Purchase Plan and expansion of the plan to WWS and PureHM (approximately $1 million);
• Reduction in the use of external business development and technical consultants (approximately $0.7 million);
• Consolidation of office facilities (approximately $0.3 million).

Additional actions to be undertaken by Q2/16 (balance of $4-6 million in savings) are expected to:

• Improve sales funnel management which is expected to reduce quarterly volatility and improve forecasting, resulting in better resource planning and improved sales performance;
• Streamline and standardize project management processes and optimize usage of field services resources resulting in higher utilization and improved operational efficiency;
• Realize additional efficiency gains through deeper integration of Pure and WWS.

Business and Operations Highlights & Outlook

Pure's Q3/15 revenues were $29.6 million, up 73% year-over-year and in line with expectations. As in previous years, our typically strongest fourth quarter is again expected to be very active.

The Company remains focused on executing its long term growth strategy of being the leading provider of pipeline condition assessment and network management services in the water, wastewater and oil & gas sectors. The strength of Pure's balance sheet combined with strong cash flow and low capital requirements provides a financial foundation that will enable this growth plan execution.

In the water and wastewater sector in the core Americas segment, revenue growth in inspection and consulting services increased 85% on a year-to-date basis. Excluding WWS, acquired April 1, 2015, inspection and consulting revenues for this region grew by 38% over the same period last year. The combination of Pure and WWS forms the platform for significant growth in 2016 and beyond.   This growth substantially offset lower equipment sales in the period. 

Simultaneously, the Company continues to capitalize on its PureHM acquisition, with continued growth in Q3/15 and increased product acceptance in both the Spectrum XLI and SmartBall product lines for oil and gas pipelines. An increasingly proactive approach to sales in this division is resulting in additional work being booked into Q1/16. 

Pure also continues to undertake several measures to increase revenue, particularly in slower periods. These include, but are not limited to:

• Pure and WWS have hired nine of thirteen planned hires to address targeted sales force improvements for broader service line and regional coverage within North America. Training is currently underway with expected benefits to begin showing early in 2016;
• Since its acquisition on October 1, 2014, PureHM has added four sales and business development individuals to promote the division's best-in-class services to the oil & gas pipeline integrity market.

As integration of prior acquisitions concludes and sales and execution of the aforementioned initiatives take hold, the Company expects adjusted EBITDA margins to return to its stated target of 20%.

Conference Call and Webcast

A teleconference and webcast will be held tomorrow morning, November 6 2015, at 10:30 am EDT to discuss these results. 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. Results 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: 1246

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, 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 Optimization Plan, integration of recent acquisitions, 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,  the Company's ability to successfully implement its 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.