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"Quarter highlighted by contracts wins in both growth sectors" CALGARY, AB, May 23, 2006 – CriticalControl Solutions Corp., (TSX-V:CCZ) today reported its first quarter financial results for the three months ended March 31, 2006. (All dollar amounts are expressed in thousands unless otherwise stated): Highlights for the quarter included (Q1 2006 compared to Q1 2005): - 93% increase in total revenue to $6,893 in 2006 from $3,570 in 2005;
- EBITDA1 increased to $880 in 2006 from ($195) in 2005;
- 15% increase in gross margin2, as a percentage of revenue, to 45% in 2006 from 30% in 2005;
- Renewed five year, $17.25 million contract for outsourced imaging, analysis and information control services with major government client;
- Leading Oil & Gas Trust selected Netflow as corporate standard for electronic gas measurement.
"We are beginning to see positive results on our gross margins and EBITDA as the acquisitions from 2005 are fully recognized”, said Alykhan Mamdani, President of CriticalControl. “The results for the first quarter are indicative of the successful execution of our 2005 strategic growth plan. Now that these key acquisitions are integrated into our operations, CriticalControl’s team can focus on our aggressive growth strategy for 2006 and 2007.”
Financial Review (in thousands): Fiscal 2005 Total revenue was $6,893 for the three months ended March 31, 2006 compared to $3,570 for the same three month period in 2005 – an increase of $3,323 or 93%. The acquisitions of BMP Energy in March 2005, Netflow in July 2005 and Deines in October 2005 contributed additional revenue of $3,081 for the period ended March 31, 2006 when compared to 2005. Revenue from the Energy sector was $3,283 for the three months ended March 31, 2006 compared to $1,248 for the same 3 month period in 2005, an increase of $2,035 or 163%. This increase is attributable to acquisitions of BMP Energy, NetFlow, and Deines all contributing $1,263, $1,208 and $125 respectively in 2006. Revenue from the Government sector was $3,307 for the three months ended March 31, 2006 compared to $1,801 for the same three month period in 2005, an increase of $1,506 or 84%. The Deines Imaging acquisition on October 31, 2005 contributed $485. The remaining $1,021 or 57% of the Government Revenue for the three months ended March 2005 resulted from organic growth, primarily due to an increase in the imaging and document control services provided to various ministries of the Government of Alberta. Revenue from other sectors was $303 for the three months ended March 31, 2006 compared to $521 for the same three month period in 2005, a decrease of $218 or 42%. This decrease was attributable to reduced resources invested in areas of the business the Corporation did not deem profitable or strategic. Gross margin1 as a percentage of revenue was 45% for the three months ended March 31, 2006 compared to 30% for the same three month period 2005, an increase of 15%. Higher gross margins on a quarter-over-quarter basis reflect improved financial performance, strategic acquisitions and contract awards in both the services and proprietary software and licensing business units.
EBITDA increased to $880 for the three months ended March 31, 2006 compared to ($195) for the same three month period in 2005.
Selling and administrative expenses (“SG&A”) was $1,989 for the three months ended March 31, 2006 compared to $1,026 for the same three month period in 2005, an increase of $963 or 93%. As with the cost of revenue, the largest component of SG&A is salaries which amounted to $1,336 for the three months ended March 31, 2006 compared to $560 for the same three month period in 2005. In 2006 various reductions continue to be made to streamline administrative functions and eliminate duplicate positions resulting from these acquisitions.
Interest expense was $408 the three months ended March 31, 2006 compared to $191 for the same three month period in 2005, an increase of 113%. $196 (or 48%) of the Q1 interest expense was non-cash related to Warrants issued in conjunction with the financing compared with $105 (or 55%) for the comparable period in 2005.
Net Income was $97 or (0.00) per share for the three months ended March 31, 2006 an improvement compared to a net loss of $813 or $(0.01) per share basic and diluted for the same three month period in 2005.
The corporation’s working capital position improved to $3,090 at March 31, 2006 compared to $2,308 at March 31, 2005 from corporate growth and financing activities in 2005.
EBITDA Reconciliation to Net Income:
Reconciliation of EBITDA to net income is shown below:
| For the three months ended | | 31-Mar-06 | | 31-Mar-05 | | | | | Net income (loss) | 97 | | (813) | Add: | | | | Interest - Long Term Debt | 417 | | 215 | Depreciation of Capital Assets | 260 | | 144 | Amortization of Customer Contracts | 106 | | 259 | EBITDA | 880 | | (195) |
Subsequent Events:
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 Critical Control’s proprietary Netflow service, offers oil and gas producers a web enabled, hosted service to acquire production and related data directly from the well site combined with functionality to control electronic well site devices remotely from any desktop connected to the internet. The acquisition will double NetFlow subscriptions and add over $600,000 of recurring annualized revenue.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 closed on April 28, 2006.
1EBITDA, defined as earnings, before interest, taxes, depreciation and amortization, does not have any standardized meaning prescribed by GAAP, but management believes is a useful supplemental measure of operational performance. 2Gross margin, defined as revenue less cost of revenue, does not have any standardized meaning prescribed by GAAP, but management believes is a useful supplemental measure of the operational and business performance. We seek safe harbour.
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
EBITDA Reconciliation to Net Income: |