TSE:ENT $
ENTREC CORPORATION ANNOUNCES 29% INCREASE IN 2017 Q3 REVENUE

November 8, 2017

  • US growth strategy continues to accelerate – US revenue up 230% from 2016
  • Q3 adjusted EBITDA increased to $2.8 million
  • Completed five year extension to senior credit facility

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

 Three Months Ended

 Nine Months Ended

Sept 30 2017 Sept 30 2016 Sept 30 2017 Sept 30 2016
Revenue 36,665 28,394 109,888 84,043
Gross profit 6,373 5,594 18,027 15,082
Gross margin 17.4% 19.7% 16.4% 17.9%
Adjusted EBITDA(1) 2,795 2,552 7,767 4,677
Adjusted EBITDA margin(1) 7.6% 9.0% 7.1% 5.6%
Per share(1) 0.03 0.02 0.07 0.04
Adjusted net loss(1) (3,432) (3,539) (10,996) (15,577)
Per share(1) (0.03) (0.03) (0.10) (0.14)
Net loss (3,768) (5,070) (11,387) (13,097)
Per share – basic (0.03) (0.05) (0.10) (0.12)
Per share – diluted (0.03) (0.05) (0.10) (0.12)
Cash (used in) provided by operating activities (3,368) (1,993) (4,250) 2,247
Funds from operations(1) 672 883 2,308 (1,104)
Per share(1) 0.01 0.01 0.02 (0.01)
Basic weighted average shares outstanding 109,540 109,469 109,516 108,648
As at
$ thousands
Sept 30 2017 December 31 2016
Working capital(1) 21,062 14,155
Total assets 230,808 242,664
Total liabilities 183,097 183,561
Shareholders’ equity 47,711 59,103

ENTREC’s revenue for the quarter ended September 30, 2017 increased by 29% to $36.7 million from $28.4 million in 2016 due to significant growth from the Company’s operations in the United States. US revenue increased to $14.2 million in Q3 from just $4.3 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 as the Company moves into 2018.

ENTREC 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 construction-related activity, especially in the Alberta oil sands region. Overall, revenue in Canada declined slightly to $22.5 million from $24.1 million last year.

On a year-to-date basis, revenue increased by 31% to $109.9 million from $84.0 million in 2016 due to higher activity levels in the United States.

With the higher revenue in the third quarter of 2017, adjusted EBITDA improved to $2.8 million from $2.6 million in 2016 and adjusted net loss improved to $3.4 million from $3.5 million last year. Despite the higher revenue, adjusted EBITDA margin declined to 7.6% in Q3 from 9.0% in 2016 due to changes in revenue mix, higher 3rd party contractor revenue and a non-recurring bad debt provision of $0.4 million.

On a year-to-date basis, the higher revenue for the nine months ended September 30, 2017 caused adjusted EBITDA to increase to $7.8 million from $4.7 million in 2016 and adjusted net loss to decline to $11.0 million from $15.6 million last year.

In 2017, ENTREC continued to execute on its strategy to grow its business through diversification and an aggressive sales effort. These initiatives included:

  • Significantly expanding ENTREC’s business in the United States;
  • Obtaining additional maintenance, repair and operation (MRO) work with existing and new clients;
  • Pursuing construction project work related to infrastructure, power generation, and other industries;
  • Cross-selling crane services and specialized transportation services to existing clients; and
  • Acquiring new customers through a continued focus on safety and customer service.

“As we move into 2018, we will continue to execute on this strategy,” said John M. Stevens, ENTREC’s President and CEO. “Assuming the price of oil can continue to stabilize and increase as we move into 2018, we should continue to see higher industry activity levels within the conventional oil and gas industry in both western Canada and the United States 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 revenue from our operations in the United States will grow further in fiscal 2018. In addition to on-going growth from our existing operations in North Dakota and west Texas, we recently expanded our operations into Colorado. Our new operations in Colorado will be focused on supporting several industries, including the oil and gas sector, wind power, and other general construction. In addition, current industry forecasts anticipate a pronounced recovery in oil & gas capital spending over the next few years in the United States, which should further increase demand for our services. We are also currently executing our first industrial construction project in the Gulf Coast region. As this project is completed in Q1 2018, we plan to leave a number of equipment units positioned in the Gulf Coast region to capture additional project opportunities in 2018,” said Mr. Stevens.

ENTREC continues to grow its presence in MRO work within 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. The Company’s revenue from infrastructure and power projects has also been increasing in 2017. ENTREC’s 2016 expansion into Manitoba and Newfoundland & Labrador is strongly positioning the Company to capture more power-related opportunities.

“Despite the various growth areas identified above, our 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,” said Mr. Stevens. “However, we remain cautiously optimistic that we will continue to achieve growth in many of our end markets over the next year and that revenue in fiscal 2018 will be higher than 2017.”

Over the longer-term, ENTREC’s competitive position is positive. The Company is well-positioned geographically, with a complete range of crane and specialized transportation services in each of its key markets in Canada, North Dakota, Texas, and now also Colorado. ENTREC also continues to be the industry leader in customer service, employee engagement and safety, which will be key contributors to its success in the long-term.

Senior Credit Facility Extension

As previously announced, on October 10, 2017, ENTREC completed a five year extension to its senior secured asset-based credit facility (the “ABL Facility”) with a syndicate of lenders led by Wells Fargo Capital Finance Corporation Canada. The syndicate of lenders also includes Bank of Nova Scotia, Canadian Western Bank and Toronto-Dominion Bank.

The ABL Facility now matures on October 10, 2022 and will continue to require payments of interest only. Along with the extension, a number of amendments were made to the ABL Facility, including, among other items:

  • A voluntary reduction in the ABL Facility to $172.5 million from $240 million previously, which will result in lower stand-by fees;
  • The removal of the accordion feature to increase the ABL Facility by a further $75 million;
  • Revisions to the sliding scale pricing levels. These revisions will generally result in a 75 basis point increase in the interest rate applicable at each pricing level;
  • Elimination of the springing senior leverage ratio covenant, which was replaced with a springing fixed charge coverage ratio (“FCCR”) covenant of 1.0x;
  • An added requirement to maintain a minimum excess borrowing capacity of $15.0 million at all times; and
  • Requirement that ENTREC’s Debentures due June 30, 2021 be repaid or extended prior to March 31, 2021. If the Debentures are not repaid or extended prior to March 31, 2021, the maturity date of the ABL Facility will also be March 31, 2021.

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 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 non-recurring 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 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 nine months ended September 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 expectation that revenue from its operations in the United States will grow further in fiscal 2018. 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 the Company’s ability to successfully expand its operations into Colorado as well as execute its first industrial construction project in the Gulf Coast region. The Company’s ability to achieve this growth is subject to a number of risks. The risks most likely to affect our revenue growth from this region include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (ii) ENTREC’s belief that it could see higher activity levels and pricing for its services to the oil and gas industry in 2018, which together with executing on the Company’s strategy to grow through geographic and industry diversification, should result in further improvements in financial results. This belief is subject to the assumption that oil prices will be high enough in 2018 to encourage additional spending by oil and gas companies. The Company’s ability to achieve this growth is subject to a number of risks. The risks most likely to affect this growth include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iii) ENTREC’s belief that it can grow its presence in the market for MRO work in the Alberta oil sands region, which could contribute up to 35% of the Company’s Canadian revenue in fiscal 2017. 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. This assumption is subject to a number of 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;(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 2018 will be higher than 2017. This belief is based on the assumption that ENTREC is able to achieve revenue growth from many of its end markets in 2018 and is subject to a number of 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

For further information, please contact:

John M. Stevens – President & CEO

Telephone: (780) 960-5625

Jason Vandenberg – CFO

Telephone: (780) 960-5630

www.entrec.com

Related Content

ENTREC 2015 Second Quarter Investor Conference Call and Webcast

July 14, 2015

ENTREC 2015 Second Quarter Investor Conference Call and Webcast July 14, 2015 Acheson, Alberta, Canada – ENTREC Corporation (“ENTREC”) intends […]

Read More
ENTREC ANNOUNCES 2015 SECOND QUARTER FINANCIAL RESULTS

August 12, 2015

ENTREC ANNOUNCES 2015 SECOND QUARTER FINANCIAL RESULTS August 12, 2015 Acheson, Alberta, Canada – ENTREC Corporation (“ENTREC” or the “Company”), […]

Read More
ENTREC 2015 Third Quarter Investor Conference Call and Webcast

October 22, 2015

ENTREC 2015 Third Quarter Investor Conference Call and Webcast October 22, 2015 Acheson, Alberta, Canada – ENTREC Corporation (“ENTREC”) intends […]

Read More