Questor Technology Inc. Announces Third Quarter 2019 Results

Source Press Release
Company Questor Technology Inc. 
Tags Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date November 14, 2019

Questor Technology Inc. (“Questor” or the “Company”) (TSX-V: QST) is pleased to announce its financial and operating results for the third quarter of 2019.

For the  Three months ended September 30  Nine months ended September 30 
  2019  2018  2019  2018 
(stated in CDN$)
(unaudited) 
($)  ($)  ($)  ($) 
Revenue  8,293,734  5,761,465  23,377,705  17,491,620 
Gross Profit  4,034,759  3,880,343  13,019,726  11,005,699 
Earnings for the period         
Per share — basic  0.07  0.07  0.23  0.21 
Per share — diluted  0.07  0.07  0.22  0.21 
As at    September 30, 2019    December 31, 2018 
Working capital, end of period    15,847,765    13,104,925 
Total assets, end of period    39,472,381    30,942,245 
Total equity, end of period    34,102,235    26,379,455 
         

FINANCIAL HIGHLIGHTS SUMMARY

Questor’s unaudited consolidated financial statements and notes thereto and Management’s Discussion and Analysis for the three and nine months ended September 30, 2019 are available on the Company’s website at  and through SEDAR at  .

PRESIDENT’S MESSAGE

Audrey Mascarenhas, Questor’s President and Chief Executive Officer commented, “I am pleased to report that the Questor team has delivered strong results in the third quarter. We remain on pace for 2019 to be another record revenue and earnings year.

The strong performance in the third quarter of 2019 is a result of great effort by the Company to secure sales contracts in Mexico, Texas, and NE British Columbia. Equipment sales during the three months ended September 30, 2019 increased $2.8 million versus the same period of 2018.

We previously announced that the Company has been awarded two projects, totaling $8.2 million, to supply clean combustion incineration technology with our waste heat to power generation equipment at multiple oil and gas production facilities in Mexico. During the third quarter, the Company achieved certain contract milestones and recognized $2.5 million of sales revenue related to the two contracts. In total, $5.9 million of sales revenue has been recorded for these projects at September 30, 2019. We expect to complete the balance of the contracts during the fourth quarter of 2019 and first quarter of 2020. Questor is ambitious with its 2020 expectations for Mexico, given Mexico’s aggressive objectives to address emissions within its mature oil and gas industry.

In addition, I am happy to announce that we have received a new purchase order for $2.2 million for emissions control equipment in Pennsylvania from a large Midstream Company at six of their facilities. We expect to complete the Pennsylvania contract in the fourth quarter of 2019. Questor is proud and privileged to serve and support new and existing clients in fulfilling their commitment to utilize industry leading technology to control emissions.  Underlying Pennsylvania, Ohio and West Virginia are the Utica and Marcellus shale plays, forecasted to supply 45% of the US’s natural gas production by 2040.  Questor has also been awarded a project for a permanent incinerator to be installed in a biogas water treatment plant in Colorado. This holds significance as it is within a Municipality that is well known to require extremely high standards for any industry that operates within its jurisdiction.  After a competitive bid process, we are privileged to be selected for this project as it signifies our competitiveness in the permanent market in Colorado.  It also validates that our low-pressure burner technology translates to bottom-line value for our clients.

Questor is focused on serving our growing list of clients in the North American basins as they focus on meeting regulatory requirements in the new environmental reality. We expect our sales revenue streams to continue to be a vital, and growing part of our business.  

Our rental revenues have increased for the 9 months ending September 30, 2019 versus 2018. Our rental business is performing very well despite new regulations in Colorado (Senate Bill 19-181) which has slowed investment in the state’s oil and gas fields as producers grapple with how local officials will respond to a law giving them more power. Questor’s Colorado clients have reduced their capital budgets, which has resulted in lower demand for our emissions control equipment in the state during 2019 with the reduced drilling activity.  The North Dakota market and our initial entry into Texas, Wyoming and New Mexico have contributed significantly to 2019 rental revenues and fleet utilization.

Colorado is ground zero for a combination of oil and gas production and environmental stewardship. Large operators are changing their approach in Colorado, recognizing they are dealing with a new social reality. Responding to that social reality includes community engagement and altering drilling plans by adding cleaner, quieter technology. Our clients believe they can work with communities, and even thrive under Senate Bill 19-181 and tough new regulations. The Company expects demand for its emissions control equipment will increase in 2020 as Colorado clients respond to the new regulations. Our data project is gaining interest with our clients as they see this technology can assist compliance with the evolving regulations.

In North Dakota, the Industry has invested billions on gas processing infrastructure but is years from catching up. North Dakota regulators are projecting that the states increasing gas production will outstrip that new capacity. Demand for the Company’s emissions control equipment in North Dakota is expected to remain strong going into 2020.

Questor is pleased to announce it has been named in the inaugural Report on Business ranking of Canada’s Top Growing Companies, an annual rank of Canadian companies based on three-year revenue growth. The Canada’s Top Growing Companies ranking program aims to celebrate entrepreneurial achievement in Canada by identifying and amplifying the success of growth-minded, independent businesses in Canada. The Globe and Mail reports Questor is ranked 185th out of the 400 companies on the inaugural Report on Business ranking of Canada’s Top Growing Companies ranking demonstrate ambition, innovation and tremendous business acumen. Their contributions to the economy help to make Canada a better place, and warrant commendation.”

THREE MONTHS ENDED SEPTEMBER 30, 2019

  • Revenue increased $2.5 million (44%) during the three months ended September 30, 2019 versus the same period of 2018:

    -- Equipment sales increased $2.8 million from $0.8 million to $ 3.6 million. The Company achieved certain contract milestones and recognized $2.5 million of sales revenue related to the two previously announced Mexico contracts. The Company also sold clean combustion incineration technology to a client in Texas for a midstream project in the Eagleford and provided clean combustion incineration technology to a client in North East BC for an oil and gas processing facility in the Montney;

    -- Revenue from incinerators rentals decreased $0.3 million (9%) from $4.3 million to $ 4.0 million. The Company recorded a 28% increase in the number of days rented for the three months ended September 30, 2019 versus the same period in 2018.  The increase in the number of rental days was offset by pricing incentives. The higher mix of contracts with pricing incentives has reduced the equivalent day rates realized during the three months ended September 30, 2019 versus the same period in 2018. The Company expects that the strategy to enter into longer term rental contracts will result in more consistent revenue streams and higher customer retention.
  • Gross margin performance for the period is below management’s expectations. The Company incurred higher than expected costs relating to the power generation projects in Mexico. The Mexico projects are the Company’s initial effort in a new and rapidly emerging market, combining combustion incineration technology with power generation equipment. The cost overruns relate to additional equipment required for installations where no local existing electricity grid exists. The Company has identified solutions for any future installations to ensure that gross margins are consistent with initial expectations.
  • Earnings increased $0.2 million (12.7%) during the three months ended September 30, 2019 versus the same period of 2018.
  • The Company continues to expand its incinerator rental fleet, incurring capital expenditures of $0.5 million for the three months ended September 30, 2019. Questor will continue to commit capital to grow a presence in regions where producers are looking for high performing, cost-effective technologies to manage their waste gas and fugitive emissions. The Company has substantially completed the 2019 - $7 million Capital Expenditure program. The balance of the capital investment in 2019 will be focused towards the development of the Emissions Excellence Control Center.

NINE MONTHS ENDED SEPTEMBER 30, 2019

  • Revenue increased $5.9 million (34%) during the nine months ended September 30, 2019 versus the same period of 2018:

    -- Equipment sales during the nine months ended September 30, 2019 increased $4.7 million versus the same period of 2018. The Company previously announced that it was awarded two contracts to supply clean combustion incineration technology with power generation equipment at three oil and gas processing facilities and supply clean combustion incineration technology to ten production sites in Mexico comprising a total project award amount of $8.2 million. During the nine months ended September 30, 2019, the Company achieved certain contract milestones and has recognized $5.9 million of sales revenue related to the two contracts.

    The Company also sold clean combustion incineration technology to a client in Alberta, North East BC, and Texas during the nine months ended September 30, 2019.

    -- Revenue from incinerators rentals increased $1.2 million (10%) from $12 million to $ 13.2 million. The increased customer base in North Dakota is the primary driver of the rental revenue increase.
  • Gross profit increased $2.0 million on a revenue increase of $5.9 million.  Gross margin performance remains strong even after consideration of pricing incentives offered to clients in North Dakota and additional costs incurred on the Mexico project.
  • General and administrative expenses were 14.5 percent of revenue for the nine months ended September 30, 2019 versus 15.8 percent for the same period of 2018. The Company expects that general and administrative expenses as a percentage of revenue will remain relatively consistent as the Company will be adding resources to meet its growth objectives.
  • The Company incurred $0.6MM of legal expenses for the nine months ended September 30, 2019 related to intellectual property litigation. The Company is the plaintiff and is taking action to protect and enforce certain intellectual property rights. The Company expects the litigation will result in the Company holding rights to patent pending technology developed by the Company.
  • Earnings increased $0.2 million (12.7%) during the nine months ended September 30, 2019 versus the same period of 2018.
  • The Company continues to expand its incinerator rental fleet, incurring capital expenditures of $6.2 million for the nine months ended September 30, 2019. Questor will continue to commit capital to grow a presence in regions where producers are looking for high performing, cost-effective technologies to manage their waste gas and fugitive emissions.
  • Cash balances increased to $10.2 million at September 30, 2018 as compared to $4.9 million at September 30, 2018.
  • The Company has in place an Operating and Capital Loan Facility. No amounts have been drawn on the debt facilities.
Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd