CALGARY, ALBERTA — (Marketwired) — 11/06/14 — CriticalControl Solutions Corp. (TSX: CCZ) today reported its financial results for the three months ended September 30, 2014.
“Management–s focus is the execution of catalyst plans over the next four quarters to penetrate the US oil and gas market with our core applications, which have been redesigned for the US market, and to penetrate the Canadian oil and gas market with our new software solutions,” said Alykhan Mamdani, President and CEO of CriticalControl.
Quarter ended September 30, 2014 highlights
Revenue
Gross margin (1) percentage
Selling and administrative expenses
Other expenses
Earnings and net earnings
Cash flow and working capital
Outlook and forward-looking statements
CriticalControl has invested significant resources in the past two years on initiatives within its Canadian and US Energy business. Management believes that the Corporation is on track with these initiatives, and they are anticipated to bear fruit in the next four calendar quarters. Quarterly revenue growth in the Corporation–s energy services business from Q1 2014 to Q3 2014, with increasing quarterly profitability over the same period, prior to the benefits of these initiatives being realized provides management optimism for 2015.
The Corporation continues to invest significantly in new products and development of existing products in its oil and gas business which it expects to bring to market over the coming quarters, inclusive of the following initiatives:
Expectations related to software development are subject to change due to changes in scope, unanticipated complexity in programming algorithms, availability of staff and errors discovered in testing. Product development may take materially longer than expected due to these risks, some of which are outside the Corporation–s direct control. Even where software development is successful, market acceptance of the product cannot be guaranteed; notwithstanding efforts taken to invest in products expected to be in demand. Demand for software may change during the development process due to regulatory changes, the price of commodities and the general economic environment.
The Corporation has launched its combined electronic fluid measurement meter and NetFlow software solution on a single price rental or leasing model in Canada in Q3 2014 and is expecting to launch a similar service in the US later in Q4 2014. Management is optimistic that this combined software and hardware solution will resonate with the needs of oil and gas producers in this uncertain market. Although early response to the solution has been positive, it is too early in the sales process to predict the impact of this solution to the Corporation–s future growth.
During 2013 and 2014, the Corporation has strategically positioned its Service Bureau Operations to day-forward imaging solutions and business process outsourcing rather than the Corporation–s historic business of one-time imaging projects, microfilming and microfilm conversion projects. During 2014 the Corporation has experienced the conclusion of certain customer contracts, or portions thereof, related to outsourced business processes due to technological change. Some of these processes have terminated in 2014 and others are expected to terminate in 2015. As a result, these eliminations have impacted the Corporation–s 2014 revenue and are expected to further impact revenue in 2015. The Corporation was expecting increased revenue in 2014 from its Service Bureau Operations related to a contract from a large Canadian bank and the penetration of its services into the Federal Government of Canada, thus providing new day-forward business process services to offset the concluded contracts. Although total revenue remained flat for the nine months ended September 30, 2014 with some new processing jobs secured and started, they have come in at lower margins in comparison to concluded contracts with higher margins. The Corporation expects margins from the newer work to increase in 2015, as the business processes are optimized.
The Corporation expects technological change in business processes to affect the Corporation–s historic revenue base, but also to provide opportunity for the Corporation–s day-forward business process solutions. The timing of replacing end-of-life contracts with new strategic contracts may result in lower margins into 2015.
About CriticalControl
In a world of escalating globalization, with an increasingly transient workforce, enterprises have difficulty 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.
Contacts:
Alykhan Mamdani
President & CEO
Tel (403) 705-7500
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