TSE:ENT $
ENTREC CORPORATION ANNOUNCES 43% INCREASE IN Q2 2017 REVENUE

August 10, 2017

  • Second quarter revenue increased by 43% to $35.9 million from $25.0 million in 2016
  • Adjusted EBITDA increased to $2.7 million from $0.7 million a year earlier
  • US expansion continues to accelerate

Acheson, Alberta, Canada – ENTREC Corporation (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, today announced financial results for the second quarter ended June 30, 2017.

 Three Months Ended

 Six Months Ended

June 30 2017 June 30 2016 June 30 2017 June 30 2016
Revenue 35,925 25,036 73,223 55,649
Gross profit 6,095 4,206 11,654 9,488
Gross margin 17.0% 16.8% 15.9% 17.0%
Adjusted EBITDA(1) 2,691 708 4,972 2,125
Adjusted EBITDA margin(1) 7.5% 2.8% 6.8% 3.8%
Per share(1) 0.02 0.01 0.05 0.02
Adjusted net loss(1) (3,878) (5,765) (7,564) (12,038)
Per share(1) (0.04) (0.05) (0.07) (0.11)
Net loss (4,215) (3,213) (7,619) (8,027)
Per share – basic (0.04) (0.03) (0.07) (0.07)
Per share – diluted (0.04) (0.03) (0.07) (0.07)
Cash provided by operating activities 718 3,634 (882) 4,240
Funds from operations(1) 919 (1,184) 1,636 (1,987)
Per share(1) 0.01 (0.01) 0.01 (0.02)
Basic weighted average shares outstanding 109,517 108,718 109,504 108,232
As at
$ thousands
June 30 2017 December 31 2016
Working capital(1) 16,976 14,155
Total assets 232,317 242,664
Total liabilities 180,659 183,561
Shareholders’ equity 51,658  59,103

In 2017, ENTREC’s strategy to grow its business through diversification and an aggressive sales effort began to pay dividends. Revenue for the quarter ended June 30, 2017 increased by 43% to $35.9 million from $25.0 million in 2016 due to significant growth from ENTREC’s operations in the United States. US revenue increased to $13.3 million in Q2 from just $2.6 million last year. ENTREC’s 2016 expansion into the Permian Basin of western Texas, combined with increased activity levels in North Dakota, were the primary drivers of this growth. The Company expects revenue from its US operations will continue to grow in the second half of 2017.

The Company also achieved higher activity levels in Canada from several sectors, including Oil Sands MRO, conventional oil and gas, and power. Unfortunately, this growth was offset by a significant decline in Oil Sands construction activity over the past year. Overall, ENTREC’s revenue in Canada remained relatively flat in the quarter increasing slightly to $22.7 million from $22.5 million last year.

On a year-to-date basis, revenue increased by 32% to $73.2 million from $55.6 million in 2016, also due to higher activity levels in the United States.

With the higher revenue in the second quarter of 2017, adjusted EBITDA improved to $2.7 million from $0.7 million in 2016 and adjusted net loss improved to $3.9 million from $5.8 million last year.

Business Outlook

“Our outlook for the remainder of 2017 and 2018 continues to improve,” said John M. Stevens, ENTREC’s President and CEO. “Assuming the price of oil can stabilize and increase as the second half of the year progresses, we could continue to see higher industry activity levels that should result in meaningful customer pricing improvements. These improvements, together with executing on our strategy to grow through geographic and industry diversification, should result in further improvements in our financial results.”

“We expect growth from our operations in the United States will continue to accelerate in the second half of 2017 and in 2018. In addition to on-going growth from our existing operations in North Dakota and west Texas, we plan to further expand our operations geographically. These plans include expansions into Wyoming and Colorado in the second half of 2017 as well as execution of our first industrial construction project on the Gulf Coast,” added Mr. Stevens.

The Company continues to grow its presence in the market for MRO work in the Alberta oil sands region. This work represents a growing market and is typically less susceptible to changes in near-term commodity prices. MRO work could contribute up to 35% of ENTREC’s Canadian revenue in fiscal 2017 and continue to grow in 2018.

ENTREC’s revenue from infrastructure and power projects is also increasing in 2017. The Company’s recent expansion into Manitoba and Newfoundland & Labrador is strongly positioning ENTREC to capture more power-related opportunities.

Despite the various growth areas identified above, the Company’s overall outlook continues to be cautious as there remains significant uncertainty as to the magnitude and timing of any future recovery in activity levels and customer pricing in the oil and gas industry. However, the Company remains cautiously optimistic that it will continue to achieve growth in many of its end markets over the next year and that revenue in fiscal 2017 will be higher than 2016 and revenue in fiscal 2018 will be higher than 2017.

“Over the longer-term, our competitive position continues to be positive. We are well-positioned geographically, with a complete range of crane and specialized transportation services in each of our key markets in Canada, North Dakota, and Texas. We also continue to be the industry leader in customer service, employee engagement and safety, which will be key contributors to our success in the longterm,” said Mr. Stevens.

A complete set of ENTREC’s most recent financial statements and Management’s Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company’s website (www.entrec.com).

About ENTREC

ENTREC is a heavy haul transportation and crane solutions provider to the oil and natural gas,
construction, petrochemical, mining and power generation industries. ENTREC is listed on the Toronto
Stock Exchange under the symbol ENT.

Non-IFRS Financial Measures

Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, loss (gain) on disposal of property, plant and equipment, foreign exchange loss (gain) on long-term debt, loss (gain) on embedded derivatives and convertible debentures, share-based compensation, bargain purchase gains, impairment of long-lived assets, and non-recurring business acquisition and integration costs. ENTREC believes that, in addition to net income, adjusted EBITDA is a useful measure as it provides an indication of the financial results generated by its principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions and before certain non-cash expenses such as depreciation, amortization, loss (gain) on disposal of property, plant and equipment, share-based compensation, bargain purchase gains, and impairment of long-lived assets. Adjusted EBITDA also illustrates what adjusted EBITDA is, excluding the effect of nonrecurring business acquisition and integration costs.

Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue. Adjusted EBITDA per share is calculated as adjusted EBITDA divided by the basic weighted average number of shares outstanding during the period.

Adjusted net loss is calculated excluding the after-tax amortization of acquisition-related intangible assets, impairment of long-lived assets, notional interest accretion expense arising from convertible debentures, loss (gain) on embedded derivatives and convertible debentures, foreign exchange loss (gain) on long-term debt, and bargain purchase gains. These exclusions represent non-cash charges that the Company does not consider indicative of ongoing business performance. The Company also believes the elimination of amortization of acquisition-related intangible assets provides management and investors an improved view of its business results by providing a degree of comparability to internally developed intangible assets for which the related costs are expensed as incurred. Adjusted loss per share is calculated as adjusted net loss divided by the basic weighted average number of shares outstanding during the applicable period.

Funds from operations is derived from the consolidated statement of cash flows and is calculated as cash provided by operating activities before changes in non-cash operating working capital. Per share amounts refer to funds from operations divided by the basic weighted average number of shares outstanding during the period. The Company believes funds from operations is a useful supplement measure as it provides an indication of its ability to generate cash flow and is a useful measure in analyzing operating performance.

Working capital is calculated as current assets less current liabilities. The Company believes working capital is a useful supplemental measure as it provides an indication of its ability to settle debts as they come due.

Please see ENTREC’s Management Discussion & Analysis for the three and six months ended June 30, 2017 for reconciliations of each of adjusted EBITDA and adjusted net loss to net loss and of funds from operations to cash provided by operating activities, the most directly comparable financial measures calculated and presented in accordance with IFRS.

Forward-looking Statements

This press release contains forward-looking statements which reflect ENTREC’s current beliefs and are based on information currently available to ENTREC. These statements require ENTREC to make assumptions it believes are reasonable and are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond ENTREC’s control.

Examples of forward-looking statements in this press release and the key assumptions and risk factors involved in such statements include, but are not limited to the following: (i) ENTREC’s belief that it could see higher activity levels for its business in the remainder of 2017 and in 2018 that should result in meaningful customer pricing improvements and that these improvements, together with executing on its strategy to grow through geographic and industry diversification, should result in further improvements in its financial results. This belief is subject to the assumption that oil prices will be high enough in 2017 and 2018 to encourage additional spending by oil and gas companies. The risks most likely to affect this growth include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (ii) ENTREC’s anticipation that revenue from its operations in the United Sates will continue to grow in the second half of 2017. This expectation is subject to the assumption that oil prices will be sustained at a level that will allow oil producers in the United States to achieve sufficient economic returns in order to increase their activity levels. This expectation is also partially subject to ENTREC’s ability to expand its operations into Wyoming and Colorado in the second half of 2017 as well as execute its first industrial construction project on the Gulf Coast. The risks most likely to affect revenue growth from the United States include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iii) ENTREC’s belief that MRO work in the Alberta oil sands region represents a growing market, will be less susceptible to changes in near-term commodity prices, and could contribute up to 35% of the Company’s Canadian revenue in fiscal 2017 and continue to grow in 2018. This belief is based on the assumption that MRO customers will continue to utilize the Company’s services for their ongoing operational activities in the Alberta oil sands and that these activity levels will increase from current levels. The business risks most likely to affect this assumption include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition; (iv) ENTREC’s belief that it is strongly positioned to capture more power-related opportunities in the future. This belief is subject to a number of risks and uncertainties, including economy and cyclicality and competition; and (v) ENTREC’s cautious optimism that revenue in fiscal 2017 will be higher than 2016 and that revenue in fiscal 2018 will be higher than 2017. This belief is based on the assumption the Company is able to achieve revenue growth from many of its end markets in 2017 and 2018 and is subject to a number of business risks. The risks most likely to affect this assumption include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition.

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected effects on ENTREC. These forward-looking statements are made as of the date of this press release. Except as required by applicable securities legislation, the Company assumes no obligation to update publicly or revise any forward-looking statements to reflect subsequent information, events, or circumstances.

For further information, please contact:

John M. Stevens – President & CEO

Telephone: (780) 960-5625

Jason Vandenberg – CFO

Telephone: (780) 960-5630

www.entrec.com

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