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On Novemeber1 Pulse Data released it's third quarter report and shreholders could hardly wait for it.They showed their data library sales were the second highest ever including a $30 million transaction in August.They aslo have $30 million cash on hand and a $30 million availability in their credit facility.
Performance Compared to 2016
This year was hugely better than the third quarter in 2016.Revenue was $32 million compared to $6 million.While net earnings were $14 million compared to a $6 million loss and cash EBITDA was $30 million.Free cash flow was $24 million or $.43 per share compared to $4.3 million or $.08 per share.
Nine Months Perfromance
The third quarter was so good that it brought the 9 month performance up as well.Cash EBITDA was $33 million or $.60 per share compared to $6 million or $.11 per share in 2016.And it has purchased and cancelled 1.3 million shares.Free cash flow was $26 million or $.48 per share compared to $6 million or $.11 per share in 2016.This again is a dramatic improvement.While the number of wells drilled only went up from 7200 in 2016 to 7550 in 2017.
But Pulse Data has made other ventures into the data area.It had a substantial position in Data Group Income fund which became Data Communications Management.It has also taken positions in Petrowest and Entrec both of which are in the oil services area.And since the price of oil has moved up in the last two quarters these new subsidiaries have become more profitable.This blog believes that this is perhaps the main reason that revenues are so far ahead of 2016.As the CEO says"We are positioned to grow the Company when accretive opportunities present themselves."And this blog expects that other accretive opportunities will present themselves.
A Reasonable Joint Venture
It is not likely that the results are this good just from a $30 million data library sale and a 5% increase in drilling activity.This blog believes that much of the extra increase in revenues was due to the new small subsidiaries acquired both on the data side and the oil services side.If true then the increases seen in the third quarter will be there in the fourth quarter.But this blog recommends another acquisition or a joint venture as PSD has a good amount of cash on hand as well as credit availability.The suggested target is Intrinsyc Technology which has good sales from it's Open -Q computing modules but desperately needs a new application.These computing modules could be used to improve service in a number of areas including field surveying.This would make a good joint venture for both companies.
On November 8 Intrinsyc Technology reported it's third quarter results.It showed that as the CEO says "the company is also garnering strong interest from recently introduced new products and has additional products in the pipeline".However Intrinsyc Technology showed only slight increases in all financial indicators.It also adds that it has earned decreased revenues from services and software.Revenues for the third quarter and for 9 months was up but only by 6% to $14 million.ITC tells shareholders that it's new products have produced new orders and new markets.But of course not all these orders will become firm revenues.
Nine Month Tally
Revenues were up 5% to $14 million from $13.2 million for 9 months of 2016.But net income was only $197,000 in comparison to $1,905,000 for 2016.Also the all important adjusted EBITDA fell from $2 million in 2016 to $1,500,000 in 2017.The key here is that Intrinsyc tells us that revenues from software and services fell from 2016.This blog believes (as do most investors) that the margin on both software and services is lower than on hardware.Rumour has it that ITC has met with several software companies and other equipment producers but has not made an acquisition.An astute acquisition might increase adjusted EBITDA as well as revenues.It is clear that ITC would have little trouble issuing equity for an acquisition as it
has only 21 million shares outstanding.
The Fourth Quarter
It is true that revenues have increased consistently for four quarters and adjusted EBITDA has remained quite buoyant.For these details see earlier Workathon blogs.But ITC will have to sharpen it's pencil and make some important changes- if not in the fourth quarter then soon.The share price has already dropped from the $2.00 -$2.25 area as investors saw the drop in sales and earnings coming. And this blog sees the share price staying in the same price range without either (a) a new product line (b) an acquisition or a joint venture to bring out new apps on it's open -Q computing modules.As this blog feels that a 6% increase in sales is not enough to get Intrinsyc Software back to
the $2.25 area.
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