Pure Technologies Announces Strong Third Quarter 2012 Financial Results

CALGARY, Nov. 8, 2012 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR), a world leader in the development and application of technologies for inspection, monitoring and management of physical infrastructure, today reported its financial results for the three and nine-month periods ended September 30, 2012 and provided a business update. All figures are in Canadian dollars unless otherwise stated. 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).

"We are pleased to report a strong third quarter performance for the Company," said Jamie Paulson, Chairman. "Pure chalked up a number of operational successes which have greatly contributed to quarterly results, further laying the groundwork for a bright future for the Company. Our engineering and technical services groups continued working with our long-term water customers during the quarter, while gaining significant new ones such as the Metropolitan St. Louis Sewer District. We are also particularly excited about the large increase in oil and gas pipeline leak detection work we have been experiencing this year using our innovative SmartBall technology. Backlog is currently over $53 million and recurring revenues are approximately $6 million for the year."

Q3 2012 Financial Highlights

Three months ended September 30, 2012

For the quarter, the Company recorded revenue of $13.4 million, EBITDA of $1.1 million and a loss of $1.0 million. This compares to revenue of $8.5 million, negative EBITDA of $2.4 million and a loss of $2.4 million in the comparable period last year.

• Total revenueswere $13.4 million compared to $8.5 million in the prior period, an increase of 57%.
• Equipment sales (27% of total revenue) and inspection services (48% of total revenue) increased by 43% and 37%, respectively. Significant equipment sales, installation and inspection work in the Americas contributed to these revenue streams.
• Consulting revenue (13% of total revenue) increased by 265% due to new work and customers added by Pure Engineering Services ("PES").
• Monitoring and technical support revenue (12% of total revenue) grew by 113%, reflecting an increase in monitored pipeline distances in both the Americas and Libya.
  
• Total operating expenses for the third quarter were $12.5 million compared to $9.8 million in same period last year, up 27%.
• Marketing expenses (19% of total expenses) and engineering and operations expenses (35% of total expenses) increased by 49% and 30%, respectively, due to an increase in business development activities and overall inspection services.
• General and administrative expenses (36% of total expenses) increased by 18%, reflective of a foreign exchange loss of $1.0 million recognized in the quarter. Removing the impacts of foreign exchange, these expenses are down 30%.
• Research and development expenses (10% of total expenses) have grown 20% related to ongoing developments to enhance existing technologies.
• Gross margin increased to 81.8% compared to 79.4% in the previous period.
  

Nine months ended September 30, 2012

For the nine-month period, the Company recorded revenue of $43.1 million, EBITDA of $6.4 million and profit of $0.2 million. This compares to revenue of $28.5 million, negative EBITDA of $5.6 million and a loss of $8.2 million in the comparable period last year.  The nine-month period has been positively impacted by an equipment shipment worth $10.7 million made to the Man-made River Authority ("MRA") in Libya under an existing 2010 contract.

• Total revenueswere $43.1 million compared to $28.5 million last year, an increase of 51%.
• Equipment sales (39% of total revenue) increased by 196%, largely due to an equipment shipment made to Libya in the first quarter.
• Inspection services (41% of total revenue) increased by 4% due to increased work in the Americas.
• Consulting revenue (11% of total revenue) increased by 47% due to new work and customers added by PES.
• Monitoring and technical support revenue (9% of total revenue) grew by 47%, reflecting an increase in monitored pipeline distances in both the Americas and Libya.
• Total operating expenses for the period were $32.5 million compared to $31.2 million in same period last year, up 4%.
• Marketing expenses (20% of total expenses) and engineering and operations expenses (36% of total expenses) increased by 33% and 13%, respectively, due to an increase in business development activities and overall inspection services.
• General and administrative expenses (34% of total expenses) decreased by 18%. Pure recognized a foreign exchange loss of $0.9 million in the period; removing the impacts of foreign exchange, these expenses are down 29%.
• Research and development expenses (10% of total expenses) have grown 33% related to ongoing developments to enhance existing technologies.
• Gross margin increased to 77.3% compared to 73.2% in the previous period.
• Working capital at September 30, 2012 was $64.5 million compared to $61.4 million at December 31, 2011.
• Current assets include $28.0 million in cash and $38.8 million in accounts receivable. At September 30, 2012, a total of $16.3 million was outstanding from the MRA, Libya which includes new receivables of $8.4 million on delivered products and services.

Q3 2012 Business and Operations Highlights

• Current backlog is more than $53 million, providing Pure with significant revenue and growth visibility. Recurring revenues from pipeline monitoring and technology licensing is approximately $6 million for the year.
• Pure's Engineering Services group now acting as prime consultant for the Metropolitan St. Louis Sewer District, who has initiated a multi-year program for infrastructure improvements.
• Completed 50 km of inspections in Mexico on a portion of a major water pipeline feeding into Mexico City - one of the largest international inspections in the Company's history. Installed a 47 km fibre-optic based monitoring system on this same pipeline in record time; ready for continuous monitoring in the fourth quarter.
• Pure's monitoring systems successfully intervened on three separate U.S. water pipelines showing signs of failure.
• Significantly increased the total length of oil & gas pipelines inspected - up 29% since the end of 2011 - utilizing Pure's SmartBall leak detection technology.

Outlook

The third quarters have tended to be slower relative to the rest of the year due to seasonal factors. Water transmission systems in North America run at full capacity during this period, often precluding access to pipelines to undertake inspections. However, as a result of the development of technologies that can be deployed in operational pipelines, such as Pure's PipeDiver technology, the Company now has the ability to schedule work during this period regardless of seasonal, operational constraints. The fourth quarter is typically the busiest for the North America region.

The water industry continues to move towards proactive asset management practices after a prolonged period of inaction. Following the expansion of Pure Engineering Services in the second quarter, Pure added a major customer to its client base with a contract with the Metropolitan St. Louis Sewer District. Additionally, Pure's SmartBall leak detection tool continued to inspect more lengths of oil and gas pipelines and will set new distance records by the end of the year.

Pure's overseas business is slower than anticipated. The Company believes the challenges are related to building further awareness rather than any change in market fundamentals. Pure anticipates business worldwide will continue to experience high growth in the future; its primary focus for the remainder of 2012 and for 2013 will be to enhance profitability through increasing operational efficiencies and cost management.

Q3 2012 Conference Call

A teleconference will be held to discuss these results on November 9, 2012, at 10:30 am ET. 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 1-888-231-8191 (within North America) and 647-427-7450 (Local / International). Please provide the operator with the Conference Call ID or Topic when dialing in to the call.

• Conference ID: 55943829
• Topic: Pure Technologies Ltd., Third Quarter 2012 Results.
• A replay will be available approximately two hours after the call and will be available for one week. Access the replay by calling 1-855-859-2056 (toll-free within North America) or 416-849-0833 (Local / International). Use the following Passcode followed by the number sign: 55943829.

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 at: http://puretechltd.com/investors/presentations.shtml
• 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 (SoundPrint®, SoundPrint® AFO);
• Recurring revenuefrom data analysis and site maintenance for these technologies, and from technology licensing;
• Premium technical servicesincluding pipeline inspection, leak detection and condition assessment (P-Wave®, SmartBall®, Sahara®, PipeDiver®, PureRobotics™);
• Specialized engineering servicesin areas related to asset management, primarily in the area of pipeline condition assessment for water and wastewater infrastructure (Openaka Corp., Price Brothers UK Ltd, and Jason Consultants).

Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words "believes", "expects", "anticipates", "estimates", "intends", "plans", or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators (www.sedar.com).

® Registered Trademarks, property of Pure Technologies Ltd.

"The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release"

SOURCE: Pure Technologies Ltd.