|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
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical to maintaining positive ROI. Raxak Protect is an automated security compliance SaaS platform and ma...
Nov. 27, 2015 06:00 PM EST Reads: 412
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Nov. 27, 2015 04:00 PM EST Reads: 172
Today air travel is a minefield of delays, hassles and customer disappointment. Airlines struggle to revitalize the experience. GE and M2Mi will demonstrate practical examples of how IoT solutions are helping airlines bring back personalization, reduce trip time and improve reliability. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Dr. Sarah Cooper, M2Mi’s VP Business Development and Engineering, explored the IoT cloud-based platform technologies driving this change including privacy controls, data transparency and integration of real time context with p...
Nov. 27, 2015 02:00 PM EST Reads: 410
The Internet of Things (IoT) is growing rapidly by extending current technologies, products and networks. By 2020, Cisco estimates there will be 50 billion connected devices. Gartner has forecast revenues of over $300 billion, just to IoT suppliers. Now is the time to figure out how you’ll make money – not just create innovative products. With hundreds of new products and companies jumping into the IoT fray every month, there’s no shortage of innovation. Despite this, McKinsey/VisionMobile data shows "less than 10 percent of IoT developers are making enough to support a reasonably sized team....
Nov. 27, 2015 12:00 PM EST Reads: 464
Internet of @ThingsExpo, taking place June 7-9, 2016 at Javits Center, New York City and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
Nov. 27, 2015 12:00 PM EST Reads: 542
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound cha...
Nov. 27, 2015 11:45 AM EST Reads: 537
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
Nov. 27, 2015 11:00 AM EST Reads: 313
As organizations realize the scope of the Internet of Things, gaining key insights from Big Data, through the use of advanced analytics, becomes crucial. However, IoT also creates the need for petabyte scale storage of data from millions of devices. A new type of Storage is required which seamlessly integrates robust data analytics with massive scale. These storage systems will act as “smart systems” provide in-place analytics that speed discovery and enable businesses to quickly derive meaningful and actionable insights. In his session at @ThingsExpo, Paul Turner, Chief Marketing Officer at...
Nov. 27, 2015 10:45 AM EST Reads: 397
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, rich desktop and tuned mobile experiences can now be created with a single codebase – without compromising functionality, performance or usability. In his session at DevOps Summit, Charles Kendrick, CTO and Chief Architect at Isomorphic Software, demonstrated examples of com...
Nov. 27, 2015 10:45 AM EST Reads: 383
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Nov. 27, 2015 10:00 AM EST Reads: 491
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
Nov. 27, 2015 09:15 AM EST Reads: 291
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and technology requirements that will drive the Internet of Things from hype to reality.
Nov. 27, 2015 07:45 AM EST Reads: 424
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessions, I wanted to share some of my observations on emerging trends. As cyber security serves as a fou...
Nov. 27, 2015 07:30 AM EST Reads: 322
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
Nov. 27, 2015 04:15 AM EST Reads: 712
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Nov. 27, 2015 04:00 AM EST Reads: 336
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now all corporate assets – people, objects, and spaces – can share information about themselves and thei...
Nov. 27, 2015 04:00 AM EST Reads: 229
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound effect on the world, and what should we expect to see over the next couple of years.
Nov. 27, 2015 02:30 AM EST Reads: 462
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true change and transformation possible.
Nov. 27, 2015 02:00 AM EST Reads: 520
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" in this scenario: microservice A (releases daily) depends on a couple of additions to backend B (re...
Nov. 27, 2015 01:00 AM EST Reads: 430
Growth hacking is common for startups to make unheard-of progress in building their business. Career Hacks can help Geek Girls and those who support them (yes, that's you too, Dad!) to excel in this typically male-dominated world. Get ready to learn the facts: Is there a bias against women in the tech / developer communities? Why are women 50% of the workforce, but hold only 24% of the STEM or IT positions? Some beginnings of what to do about it! In her Day 2 Keynote at 17th Cloud Expo, Sandy Carter, IBM General Manager Cloud Ecosystem and Developers, and a Social Business Evangelist, wil...
Nov. 27, 2015 01:00 AM EST Reads: 567