CALGARY, AB, April 25, 2006 – CriticalControl Solutions Corp.,(TSX-V:CCZ) today reported results from its three and twelve month periods ended December 31, 2005 and announces director approval of an employee share purchase plan. (All dollar amounts are expressed in thousands):
Highlights for 2005:
50% increase in total revenue to $20,087 in 2005 from $13,421 in 2004;
EBITDA1 increased to $1,617 in 2005 from $1 in 2004;
8% increase in gross margin2, as a percentage of revenue, to 42% in 2005 from 34% in 2004;
Acquired BMP with its proprietary technology, ScanGas, to image and analyze charts generated by gas meters;
Acquired the business and assets of NetFlow which, when combined with ScanGas, will enable gas producers to control 100% of their production information;
Acquired Deines Imaging which provided imaging services to government and energy clients in western Canada;
3 year, $8,500 extension and new work on primary outsourcing contract with the Government of Alberta.
"In 2005 we focused our efforts on acquisitions that would provide our clients with 100% control of their production data and would solidify our current relationships with Government clients,” said Alykhan Mamdani, President of CriticalControl. “The results for the fourth quarter and fiscal 2005 are indicative of the successful execution of our 2005 strategic plan. We have established a market leadership position in gas measurement with our integrated gas production information system ScanGas. In 2006, we intend to improve operational efficiencies and to aggressively pursue our identified areas of strategic growth.”
Financial Review (in thousands):
Fiscal 2005
Total revenue was $20,087 in 2005 compared to $13,421 in 2004 – an increase of $6,666 or 50%. The acquisitions of Valcura in Q4, 2004, BMP Energy in March 2005, Netflow in July 2005, and Deines in October 2005 contributed additional revenue of $7,021 for 2005 when compared to 2004.
Revenue from the Energy sector was $9,005 in 2005 compared to $5,052 in 2004, an increase of $3,953 or 78%. This increase is attributable to acquisitions of BMP Energy, and NetFlow both contributing $3,718 and $996 respectively in 2005.
Revenue from the Government sector was $9,247 in 2005 compared to $5,785 in 2004, an increase of $3,462 or 60%. The acquisition of Valcura (real property solutions group) in 2004 contributed $1,889 in 2005 compared to $507 in 2004. The Deines Imaging acquisition contributed $418 in 2005. Organic growth revenue was $1,155 or an increase of 20% from 2004 provided by an increase in imaging and document control services.
Revenue from other sectors was $1,835 in 2005 compared to $2,584 in 2004, a decrease of $749 or 29%. This was attributable to reduced resources invested in areas of the business the Corporation did not deem profitable or strategic.
Gross margin1 in 2005 was 42% in 2005 compared to 34% in 2004, an increase of 23%. Higher gross margins on a year-over-year basis reflect improved financial performance, strategic acquisitions and contract awards in both the services and proprietary software and licensing business units.
EBITDA increased to $1,617 in 2005 compared to $1 in 2004.
Selling and administrative expenses (“SG&A”) was $5,651 in 2005 compared to $3,635 in 2004, an increase of 55%. As with the cost of revenue, the largest component of SG&A is salaries which amounted to $3,818 in 2005 compared to $1,829 in 2004. Management expects that SG&A salaries will increase in 2006 because of a full year of costs for the 2005 acquisitions will be incurred, but will decrease as a percentage of total revenue.
Interest expense was $1,516 in 2005 compared to $472 in 2004, an increase of 221%. The increase is due to interest costs related to the additional long-term debt of $3,001 incurred in 2004 and due to the additional financing secured in March 2005 to purchase BMP Energy.
Net loss for 2005 was $1,326 ($0.01) per share an improvement compared to a net loss of $2,551 or $(0.03) per share basic and diluted in 2004.
The corporation’s working capital position improved to a surplus of $2,597 at December 31, 2005 compared to $1,940 at December 31, 2004 from corporate growth and financing activities.
Fourth Quarter Fiscal 2005
Total revenue increased to $5,998 for the three months ended December 31, 2005 from $3,780 for the same period in 2004 – an increase of $2,218 or 59%. Quarter-over-quarter growth in revenue was driven primarily by demand for the Company's proprietary Netflow solution for real time gas measurement and the acquisition of Deines Imaging in November 2005 which contributed additional revenue of $418 during the fourth quarter of 2005.
On a segmented basis, revenue from the Government sector was $2,924 for the three months ended December 31, 2005 compared to $1,857 for the same period in 2004, an increase of $1,067 or 58%. $418 of this was due to the acquisition of Deines, with the remaining $649, or 35% due primarily to organic growth. Revenue from the Energy sector was $2,730 for the three months ended December 31, 2005 compared to $1,269 for the same period in 2004, an increase of $1,461, or 115%.This increase was primarily driven by the acquisition of BMP and Netflow in 2005. Revenue from other sectors was $345 for the three months ended December 31, 2005 compared to $654 for the same period in 2004, a decrease of $309, or 47%. This decrease was attributable to reduced resources invested in areas of the business the Corporation did not deem profitable or strategic.
Gross margin in was $2,690 or 45% for the three months ended December 31, 2005 compared to a gross margin of $1,302 or 34% in the same period in 2004.
EBITDA in the three months ended December 31, 2005 $675 compared to $466 in the same period in 2004 an increase of 45%.
Net loss for the three months ended December 31, 2005 was $140 ($0.00) per share compared to a net loss of $1,808 or $(0.02) per share basic and diluted for the same three month period in 2004. These improvements were due to organic and seasonal growth in the Energy and Government businesses and the acquisition of Deines in November 2005.
EBITDA Reconciliation to Net Income:
Reconciliation of EBITDA to net income is shown below:
| For the three months ended | | For the twelve months ended |
| 31-Dec-05 | | 31-Dec-04 | | 31-Dec-05 | | 31-Dec-04 |
| | | | | | | |
| Net income (loss) | (140) | | (1,808) | | (1,326) | | (2,551) |
| Add: | | | | | | | |
| Interest - Long Term Debt | 454 | | 203 | | 1,516 | | 472 |
| Depreciation of Capital Assets | 271 | | 845 | | 902 | | 1,444 |
| Amortization of Customer Contracts | 90 | | 294 | | 525 | | 637 |
| EBITDA | 675 | | (466) | | 1,617 | | 1 |
Subsequent Events & Outlook:
On January 17, 2006, the company announced the selection of Netflow as a corporate standard for electronic gas measurement by a leading oil and gas trust. The New Netflow Client is a long standing client of CriticalControl's industry leading ScanGas application and service to capture volume information from gas charts. The integration of Netflow into the Netflow Client's gas measurement process enables the procurement of all of their gas volume information from a single source, enabling field balancing and field optimization in fields where both gas charts and electronic measurement is used.
On March 9, 2006 the company announced the renewal of their relationship with a Government client, ensuring an annual $3,450 in recurring revenue into 2011. This contract combined with the continued expansion of imaging services to provincial Governments clients has resulted in stronger recurring revenue base from the Company’s Government offering for at least the next 8 quarters.
On April 21, 2006, the Corporation executed binding agreements to acquire the Remote Data Acquisition (“RDA”) Network from Crimtech Services Ltd. (“Crimtech”). The RDA Network, similar to CriticalControl’s proprietary Netflow service, offers oil and gas producers a web enabled, hosted service to acquire production and related data directly from the wellsite combined with functionality to control electronic wellsite devices remotely from any desktop connected to the internet. The purchase price consists of $550 in cash and shares of the Corporation as well as a deferred payment of $250 payable upon meeting certain performance criteria. The transaction is expected to close on or about April 27, 2006.
During 2005, management believes the company developed a market leadership position in gas measurement through the continued acceptance of our proprietary ScanGas application, now used by over 200 gas producers in Canada to provide gas measurement data from gas charts, which are still generated by the majority of gas meters in Canada. As electronic measurement devices gain increasing acceptance across the market as an alternative to the implementation of new gas chart recorders, CriticalControl intends to capture market share through the advantage of being an incumbent provider of gas measurement data and by leveraging its proprietary Netflow technology. Netflow is now a market leading automated productivity solution capable of gathering electronic data as well as remotely controlling well-site devices.
Management is pleased with the improvements in revenue and gross margins on a quarter-over-quarter and period-over-period basis. Management expects revenues for the first quarter of 2006 to be between $6,700 and $6,900, with earnings before interest, taxes, depreciation and amortization to be between $750 and $900. In 2006 management intends to continue its drive to obtain operational efficiencies and to aggressively pursue our identified areas of strategic growth.
Adoption of Employee Share Purchase Plan:
About CriticalControl:
CriticalControl is a technology company that builds, implements and manages critical business process solutions. Our proprietary products are data management tools to operate the critical business operations of our government and energy sector clients. In addition to our proprietary products, we implement large scale document and records management solutions using our strong domain expertise and in depth knowledge of our customer base. Where critical processes require unconditional continuity, our clients look to us to manage and perform certain operational functions on a short term or long term, outsourced basis. For more information please visit www.criticalcontrol.com.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.
For further information:
Alykhan Mamdani
President
Tel (403) 705-7500
or
David Feick
The Equicom Group
Tel (403) 538 4787
Fax (403) 266 2453
dfeick@equicomgroup.com