PFIE - Earnings call transcript Q2 2019

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Operator

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Profire Energy's Second Quarter 2019 Ended June 30, 2019.

Joining us today is President and CEO of Profire Energy, Brenton Hatch; and CFO, Ryan Oviatt.

Before we begin today's call, I would like to take a moment to read the company's safe harbor statement. Statements made during this call that are not historical are forward-looking statements. launch statements, expected not expenses, growth, international investments assets, beneficial beyond, and the markets forward-looking future regarding to, expansion contains the potential the the of XXXX additional the successful financial the markets, company's products, M&A company's the exploration international increase planned call including, of company limited in but opportunities, statements into of performance. availability integration This of employees, new resources of in make to hiring company's of acquired and operating

All such subject to changes and uncertainty forward-looking statements are in circumstances.

materially are of to or cause not actual Forward-looking or materially or statements could assumptions anticipated results or events guarantees in differ performance risks, and described involve events that from results uncertainties and the future the results Factors such the Commission. economic, and could risk the certain include and with statements. in factors public identified statements filed Securities by business, reports forward-looking forward-looking market company's Exchange periodic regulatory affect that

are of the except should the of and XXXX. pursuant required statements or Act statements to events reflect made law. were company circumstances, All forward-looking to forward-looking date Reform provisions as of only safe of Private this Litigation All forward-looking made the forward-looking obligation reliance assumes the subsequent Securities update release to Readers on undue not statements place by these as no harbor statements.

website call XX, via recorded and as in being accessible company's at for August provided press that will is will through later XXXX, starting as I yesterday's this would this everyone www.profireenergy.com. well link to like available replay evening. the the remind release be be It

questions. the and Mr. call Mr. by to we Oviatt, remarks Hatch will the open your Following

Profire Vice be Business Messrs. Oviatt of will Energy's Officer, and Product Tidball; Fugal; Patrick of Operations, question-and-answer Hatch As Cameron President part joined the President session, Vice Chief Development, Fisher. of Jay Development and by

to Officer Brenton of Please go call and Profire to Now the the ahead. Hatch. over would I Mr. Energy, like President turn Chief Executive

Brenton Hatch

we two an were everyone separate two robust And for for Welcome call were strategic to we Profire. we months, this earnings Services, and acquisitions. to our acquisition second last two transactions much. Profire thank closed June, added of you goals line. Products our a In which you achieve in able on closed interest asset the your company performed purchase Thank very LLC. our Both called we quarter product as milestones objectives. on Energy with week, to in Millstream the of and Midflow line these In

opportunities. able to happened these same assets. years, resources available have the a quickly react several newly to just work purchases the last had integrating to to on and the continue we It that maintained so we frame and be the in Over cash complete both time acquired the large balance to became opportunities

of Canadian company when burners, and related flame privately held Many was economy Products products Energy Profire developed these combustion a control systems. Millstream plates housing, management arrestor burners, a customers high-performance other line currently burner that buying are secondary purchasing components. air

previously us sales more With these now were the able of at we combustion available to the market we to additional not and products, capturing margins are that obtain. are

was LLC the burner to able systems. They Profire our is Ohio. and have these last leverage in has company tremendous positive few been there located staff existing grown resellers customer sales largest of of years Midflow one products feedback new Our base and to the customers. sell already Services, steadily management services an over our from oilfield is

and Midflow complementary we network. The Northeastern are applicable leverage adding our other United which are and increases brings and industry direct retained all improved products, plan customers Profire's XX knowledge Profire. Midflow experience. nearly to analyzing sales the footprint development, the of employees we opportunities, customer We to team. product share the years immediately Profire from This States, strong expand industry market team new that M&A leverage by provide Midflow, expertise, the throughout acquisition When and additional relationships add companies serviced currently markets, looking expertise for in

both within quarter, to our the believe and primarily $XX these that strategy from million We were end operation cash were Millstream and coming the in years. the the propel cash liquid will acquisition on fund acquisitions at of $X.X over spending We the flows quarter. through in fit able Despite period. investments acquisition during growth the million our

year. achieved in million same the income we same in the price decrease part and last to average period. oil an quarter, net decrease period during $XX.X the This revenues $XXX,XXX. a total a represents For of This from of the approximately was due total revenues XX% drop in XX%

to low anticipated remaining previously, first ongoing for revenues and throughout the half of industry. industry the with to XXXX of within our our acquisitions mid-$XXs enhancing we indicated product a and macro continues a the fluctuating the in anticipating This half as believe volatility flat including barrel oil the year as were development, oil leader and to industry. market We XXXX relevance QX volatility the with price volatility strategies, are the this per between we experience and first As barrel. has the true gas investment held $XX of due technology

to Profire. offer continue international for could significant opportunities also evaluate We that markets

with distributors We globally. to establish relationships working are additional

Middle in have seen America. our We the Asia, East in South and efforts progress

success a of We as dedicated opportunity our growth. the major international to sales as we this for are see

plan. strategic year has belief increased structure our about to have our company's believe though will the we in these Even capital XXXX, us changed. core We investments enable not five investments growth our achieve

core recent continue cash support significant maintain remain a and Our we company's reserve. our to values debt-free activities and

now will for CFO, financial our the Ryan? down discuss turn quarter I Ryan said, to Oviatt, over the results XXXX. that it to With of second

Ryan Oviatt

Brent. closed, SEC filed and highlights Thanks, press with a Yesterday, in release. market the the after we our discussed the quarter's XX-Q

in be coming are will As always, website. documents of Investors available on of posted both the our of those this the transcript The days. call section

and the The the this acquisition purchased in flows Brent is investments. liquid upstream of million reach quarter million us Energy in quarter. years. by in quarter, products was a solution. our As ended revenue customers It the additional that Products. during over $X cost an or million offering to through of million CADX.X We funded anticipated was allow and midstream purchase $X we million. should acquisition expand the will in This The product of cash additional discussed, $XX operating Millstream annual the US$X.X total the assets with coming broader to in cash primarily our result

million with react just environment. and many lockup. subject opportunities. $X.X will to additional Midflow on Services, that both annual to share Total pressures, quickly purchased revenues. that approximately $X.X under acquisition $X We of issued to of believe the strategic million continue expected million Midflow cash between US$X stock, $X.X and million Profire's $X.X the still million annual of in has acquisitions XX including cash month to million add in restricted LLC for hand $X.X coming to was influenced We years. revenue We for million, in enough the cash means macro spent price Profire believe by negatively a been

pursuant our additional the to $X Given balance an Board stock stock to repurchase approved Directors program. price, company purchase our million current our existing stock and of cash

same the statement. from we at period the recognized year revenue, by is ago. down million $XX.X quarter, a which In income continue looking the Let's XX%

These average QX America have focus was decreases QX for the in E&P continued have North on dividends the expansion. XXXX oil mentioned, XXXX historic weekly average the prices of price and than CapEx XXX, QX period average like XX% In QX X,XXX count was to rig Brent and XXXX. decline lower explorations last same oil capital in in they year. in the companies of compared debt more XXXX. share followed on buybacks As discipline, than reductions, the to have

XXXX we spending a CapEx and or E&P trends, of companies back have result believe later pulled As these even to XXXX. planned macro budgets deferred many on in

$X.X reserves. profit an warranty activity in fluctuation in professional expenses of the direct of due PFXXXX inventory the the total revenues, mix XX.X% development gross quarter. margin or XX.X% profit labor in The product fees million XX% decreased costs our from compared to certifications last $X.X and million acquisition revenues increase operating to related in year. approximately This a changes, were or increase of product. to adjustments $X.X same to and and year ago Gross is total wages, was quarter same to due and Total million increase or primarily

continue As to as This revenue, execute in plan. year a we total investments XX.X% compared expected operating percent of expenses to to increased strategic a the our quarter as increase an growth of part was XX.X%, same ago.

XXXX. challenges. We our investments increase TO in a may due of operating XXXX we Currently, ago expect announced G&A we mentioned XX% continue to we outpace XXXX year XX% short-term the forecasted that XXXX, compared in of full half in year. increased second are the XX% of the the XX% same R&D As growth the operating to increased ongoing when the expenses year to increase, and from for Operating we the industry expenses for in X%, increase the to decreased depreciation XXXX, which to beginning revenue as below compared plan expenses expected originally but total quarter.

to and G&A to primarily roughly the intend R&D activities. $XXX,XXX, Total is acquisition in investments on of the certification to is to and development sale related fixed We interest throughout was other additional to period hiring keep increase due majority of XXXX. investing costs. assets. which increase fees The labor increased related in attributable product during expenses largely was and the in The professional income

expenses. diluted the income same net the XX% or due Our income a $XXX,XXX per net to lower share, over income was operating million and same year. in $X.XX diluted revenues quarter share year increased to ago compared $X.X is of down last or quarter $X.XX Net

nearly Cash forecasts Now worth $XX.X let's totaled a acquisition, $XX at million levels of at as XXXX. over the look to $X.X working decrease hand. end end inventory million balance of the to carry the at to is XXXX. requisite from million vendors inventory inventory on the Despite result liquid $X just sales closely compared $X purchasing decreased our through sheet. of million of with operations team and investments This the and

collections accounts in only strategy plan strong, our XXXX and over market continue the Our XX investment receivable to increase days total advantage was accounts of remained opportunities to Profire's of of help take receivable. potential. will accounts balance that We X.X%

to company these attend and conferences to plan months about growth well that additional and developments be existing in in through discuss community for sales acquired coming product have includes invest strategies support our enhancements of We to the plan and recently core product the lines. as the product speak over Millstream. This values. our the investor active several staff Midflow investors with XXXX and as investor We been to products

that, With send thanks, it you, to Brent. back and I'll

Brenton Hatch

that we We've growth investments will Thanks, do Ryan. Thus future the the making help into we've so for been drive believe chosen remains Profire. volatile. gas in far oil XXXX, and to though on focused well industry even

to expect oil fluctuate. We to continue prices

programs. still are The in in that balance rates are shared reducing performing This to surpassing layoffs decreased drilled In sheet rates. order drilling E&Ps on but reports years debt participating streamline nearly wells, in and receiving the have time expenses. two functions stock focus continue buyback the is by to DUCs, completion and uncompleted that slightly. E&Ps we first and or services improving We quarter, reduce seen

recently We in continue DJ to the passed Colorado legislation the market as sales affect could the adversely Basin. monitor closely

strategic are increase back to live of the we our within and continue plan Profire's our quarter, has the we Profire price of sector to investor the of in to are risk toward products a and injuries as in well or drastic work. as XXXX, price. we to with the in reflection response macro intend initially the and a able rather which thought However, workers the a death. as safety performance. is we to company the affected region. and objectives. Profire's not give that combustion-related the performing the and oilfield than communities We apathy believe energy growth industry alleviate stable the current is been quarter Throughout Throughout we were stock we designed impact even

currently five with We which our helped others, to The in we community center. with care of the establish this it organization field use. and survivors this some our products Utah is the center which at where of beginning. grow others the receive is and excellent way that core skills. we safety, Over has reflects worked and Health important reviews. the is University to in develop receiving therapy PFXXXX years, product, Charitable in Burn giving Profire its a learn continues past employees, ease to increasing values can. to to vendors coping have trials of customer Center Profire that our $XXX,XXX satisfaction believe burn give back Profire helps approximately is donated and Jointly and to

our We and acquired. products to require other products, continue recently for plan to and enhancement mechanical – the the PFXXXX product integrate we

Our Canada and employee Alberta, we to base new time thoughtfully current integration intend are strategic needed facility accretive. working this ensure opportunities to Millstream track workspace later to to and the is the year, upgrades as acquisitions much our additional open Midflow conditions. their of in Canadian focus We value has explore on invest outgrown on providing the as

leader years. within consistent Our the of strategic outlook will oil with the industry, investments optimistic. for remain the investments industry. revenues in with market we intent These and But are Profire trends XXXX the is help in technology increasing coming gas a making

the call get Q&A up instructions Operator, started? would provide to and please we questions. the we so you, open can you will appropriate Thank now the

Operator

this first Rob Sure. Capital. session. At with with a Our the your question-and-answer from question Street Instructions] conducting Lake time, Thank Brown be line comes we’ll Please questions. [Operator you. of proceed

Brenton Hatch

morning, Good Rob.

Rob Brown

Hi, Brenton.

demand it Is of it or sort it choppy, this of question but improve? you've just deteriorate help has been seeing you it kind how sort at on recently. environment. First know is how you the of Or seeing understand – to I that's been it changing visibility maybe talked are point? be me stable quarter-to-quarter? Are the

Brenton Hatch

an drastically try that so – effort as are some company every to in bottom We count aware cut to we that employee improve and out I it's different on lines. their suppose have E&P there,

and have to As earlier, don't working seem acquisitions, customers – as through shipped even find comments as new previously We've a haven't hustled to we budgets found right efforts Ryan's that we've now lot team sheet been new balance quarter. getting CapEx sales by these much able be that But attention out this customers these our have of to past really product on had. that companies. since we overall, gone

so we we're sales offer we and out quite standard we will well of be optimistic the And that that that of standard to able service there maintain get. the

Today, have where to Rob, at of the go, going is market $XX. it's oil idea. was changing. $XX terms Yesterday, no In at we and

really all the no have day, by said, for And so is establish day that going when random. changes. I being hard so it's is And that a to do. E&P think But these companies pretty CapEx of plan what market we to it idea

Rob Brown

product place? for Thanks then for in great. And how on you you of the can business, of you can that maybe take did, think Okay, Millstream – the what color that are acquisitions sense sure. that grow the the and a in particular the areas growth business some there

Brenton Hatch

want Cameron, to one? do you address that

Cameron Tidball

You bet.

obviously, gives Millstream were it acquisition, before. us the that product With we selling

the the not supply manufacturer you're mercy However, really we antiquated of at and were distributors products. and old

it pretty have fuel Profire the at; does good you acquisition, you don't at and this and which housing, solution; with to Profire often advantage other from at; flame you arrestor you supplier reseller. have great the which no does we we're management have but again, because the so very a a really buying And strategic win controller, we're, have train, in burner win we burner any which and

production XX% bringing which a meet over or company the feel sell. have each equipment a we on products, of we in BMS opportunity range the increase over believe has market, of spend we for is With the we are on need – the American that – that great quality, North great to of which that those that

to sell we price should users average the that increase resellers. So to ability every have end solution and sales

Rob Brown

of is of to the I on working question. looking is things last how but XXXX? Okay, you're year kind know and the market, growth kind The going this that that great. then how seed XXXX, And into ramp

Brenton Hatch

to how First, in Cam, can modules Mr. that's efforts regard. to the speak so terms want address in of do then you of you the forward? just second new perhaps, sales the Fisher, a development going on and for that And

Patrick Fisher

okay. Hi, not Yes.

Brenton Hatch

hear you. can We

Patrick Fisher

Yes.

product lines products putting multiple working up. we’ve really do back the towards it effort a to lot same research adding part now and to we product beyond can so – – to features to the a been time where So key development development product open we're expanding the of XXXX at line team some –

So missing really where few be there and go when just we've the to go and to here working help those just here feature get the team and to says add over offer over cases specific of say yes the in want – pack. had to to a there's a the you the certain six market, do we'll next have be a this continue address And can in so the to features sales kind and the they and able feature, just customer they'd product. – months

Brenton Hatch

Cam, Thank Patrick. sales? Terrific. you,

Cameron Tidball

Yes.

gone in Similar or the to deferred. oil price the space the down You because number the of we've bet. market realm seen projects down, are how projects has of slightly with XXXX come

said, the product per are amount However, modules the up, that amount each is being up, that is our sell revenue of XXXX average for up. taking project the of customers with we is

we've is it's is far overall, showing So we the had, that year-over-year, market. – so in percentage bright a it's that our of which side by adopted being revenue up been XXXX,

who becoming and the and are proficient. servicing installing product selling professionals Our are

there garnered so to much we're And from not seeing for quo as products. alternative lot being status or a with the companies out tired wanting who not – deal of interest are tired that's

in So XXXX. very, so far positive very

Rob Brown

I’ll Thank turn you. over.

Brenton Hatch

Rob. Thanks,

Operator

Capital. with proceed from with question. The the line next is your question White John Please of Roth

Brenton Hatch

way. your Missed

John White

good Yes, team. morning,

that pieces of what of are a of Maybe, the recently I the name named. equipment didn't a in companies, those that acquired of don't, and questions. Cameron, two describing those, couple manufacturer equipment pieces they So you those catch – described couple you

Cameron Tidball

not Profire own burner. natural its actual does have The manufactured draft Sure. burner,

other the isn't any have are the tube other explosion main makes We pilots Those those but the actual fire there are burner which being two it vessel. products outside is to the the itself. outside that the that have, come the the of arrestor, housing two or which main products. customers There of that able and components, ones. but fire And not are so for on goes flame safe they

John White

sellers cases business with sales feel a And so benefit integrating from their in the Profire standpoint? both will

Cameron Tidball

and that packages, Yes. the comes deal of The solution buyers, round and that shop, complete the equipment, can one of of to is to purchasers more that goal solution add, out the place become one-stop allow more with whole that where into Profire play.

John White

you. wasn't I or sales XXXX. or Are higher than lower? clear Thank on the higher of quarter the And you'd than last those expect

Cameron Tidball

So pipeline They're we're sure. in expect for they're to on interest, quotes, of for we showing for approximately the where what year, the predicted the see amount is terms the – we strong But we wanted customers growth. or quarter, flat. the where budget of the for

John White

All Can progress right. I And may. us you PFXXXX? if some one give of color more follow-up, the the on

Cameron Tidball

tackle Yes. Brent, that do you me or? to want

Brenton Hatch

be you? You that'd great. bet, Would Yes.

Cameron Tidball

the it's close So we'd like where schedule to it. XXXX, see to

in first out field. our have the trials We

it Of is and report it testing feedback happy that we to course, trialing field, in we've months, are strong. been in-house the now for many but customer

rate we've like installation manual items or whoever sort of we to see the but them we've any it, and Of without any and product, is one on reviews the how touch each new training course, and experience. asked they user things to can with tweak, do it, that there's commissions done it do with of

launch coming bunch more So get look formal we on a year, mass to this are our with launch and a then the goals or quarters. in right of greater pace to out

John White

in And XXXX first quarter, field Okay. the were no for the right? there trials

Cameron Tidball

That’s yes. correct,

John White

very much, All Brent soon. and right. you see to Well, you I hope thank

Brenton Hatch

Thanks, John.

care. Take bet. You

Operator

Capital. question proceed Samir of Askeladden The with next Instructions] Please from [Operator the Patel line the your question. is with

Brenton Hatch

are you? how Samir,

Samir Patel

Doing well.

basis? a be Ryan, XXXX terms an Can OpEx should rate So and run a thinking didn't on OpEx. you fully annual then in understand there's on what of or of I either I we about of second kind your – know quarterly something, or comments or XXXX if half for the don't number

Ryan Oviatt

Yes.

not increased a the year rest would as you mentioned, were about obviously the the you certainly, I come be from QX year, costs, XX% if that of at have fairly same we those we we QX the to back number months and year, have rate the prior of to through QX someone Obviously, where QX, few level And the talking of the the that some easy even in then see cost you of compare a the they carry into and over quite at increase So we're that we at but run in that But is start up so with. upfront, you were as in increase. don't year. year. end-loaded for expected into hire XX%

some the of year. gone six have last in we months is costs with, full but associated second hiring of we that the there months in So didn't will half that the six we've through

in expect the bit. do little still mentioned, QX. overall, as to start up run in hit I in So that full we is and expect increase forecasted not year. going that that will we're QX more the the rate bit we at that that, at million so a $X.X I little had think, increase Operating XX% of a QX, spend we we costs, may But come

being investments be nonetheless, the that facing are some year. and and committed But international investing continuing the add market sales products of the right exploration are we started this at bit to areas we the team, and talking are that we that continuing in when throughout looked in additional go we've we're at the still as about. that the grow the investment than year been point to we this with facing those what So and us different obviously, are a we evaluated deal challenges would year thought

The of be little increases helps we're that associated costs and the these in year. we'll But Hopefully, with believe we a bit little. additional there's consulting do more costs cost second so we've integration half done, a continue going that very to and about to acquisitions those. ongoing the being of obviously strategic some

Samir Patel

That’s line perfect. on I for. more Yes. part two was top looking And what side, the question. then That’s

or here, cadence when you about of some have this months on in So assume you would terms new sort I kind growth several would these of expect what cross-selling can't XXXX, of a don't but Cameron I and services expect? terms in think avenues of just in? brought in last you – sort know products terms the prices, expect let's that of that for flat acquired each control if what a you various to when you is in who, international, you've maybe the Like kick demand of oil you know of cadence but environment, of those buckets the

with then do guess about decisions that? organization these How do I area, haven't and it more. the in pull you – over separate bit area you've might invested invested hasn't and think an you investments the back of or and obviously how And you another as make about a it like more little success CMS, when long-term various think worked question is a like gauging spend one in to sense and

Brenton Hatch

Boy, you that on questions that. answer Samir, because really one, that can the hard like he called out Cam Right, I'm Cam? on glad

Cameron Tidball

Yes.

Samir, you. bet. meet to You nice

two there's grow. that of a there's believe that We So buckets we burner that believe that the immediately, to seen want we've will lot able We believe years. the few have want drilling adding believe down over top to obviously, different the because We continue pie. we'll organically be these lot by we grow our and And of will increase occur. revenue, to room. go retrofits. all we past piece new line we acquisitions, it of to management, a as Again, up

amount. x, that market able increase whatever be should So is, top that Profire to whole

what have done we some acquisitions we to and that's years is what So of piece pie to we've analysis been, bigger on really there these the could looked of because get. and thought previous led believe a

total we take increases – those and already so But that the that place. it's for we see that ebbs shortly. year starting take to does pie flows, place? when Now Well, should again, believe

sales course, of able burner Well, different to success – many going how sell. analytics in the our to to gauge what these see many of have are of we're management, we do we how place we for – of be we average see that? what's in how can products terms Now price

easily very So tracked.

In very terms space, fun. challenging, very international of

partners at Again, We do every this are footprint. we in deployed time. bricks-and-mortar with believe just strategy, we our a increase international occasion, haven't actively great strategy working to not not that's a

we will find MENA just region. looking Latin distributors We've actually the started in had We've be that gains some top Asia and the not reputable make in see product So and can had notch success Profire's represent feel America. our there. to another line? to card. a impact We've more it some success on line When big to

a larger that. not necessarily and to of however, in see it know able OEMs already foothold to coming a the percentage track we're quarters hope We have where We do U.S. it's we nice percentage. through internationally, a lot it goes

of kick we're and We work trust, we'll relationships and Well, with suppliers will in to product some I to coming we're good start to had at ones more that that. whole that's sell Profire working good the those in? see overall what our then, is add year. can foresee where we will what see And core sense to add when add What where that. margin our customers, picture we And we to the can we're current? more noticeable sales channels being of that to seeing team from when looking fruit forward perspective. XXXX with, So the more again, to it a package of their that sales makes

in things an got knows? to Is $XX? different same going at whole put Who that and the these they're being oil place all all time. pushed be Is big we've out think beside we're you going Again, it to of pie at be I at $XX be the But and it, slivers asterisk building to it at going everything. next Is year? $XX?

terms we're if and in we're think our third-party of place. know, that our we're time, on we're in Samir, the training working how a people I question I investing how that don't your So great with et cetera/ that's answers but investing suppliers, that's completely,

Samir Patel

Sure. and when SIL a you drive And on all expect the higher cadence touch the XXXX maybe of bit, that certification to little to sales.

Cameron Tidball

we've into got that. have I we that Yes. SIL. into believe without gotten seen wouldn't doors We've

So in QX an again, QX we're And we our sometimes the that's as so know quarter-over-quarter we've seen happening, But is that. seeing flat. is still, increase. as same periods our much year-over-year, versus but pretty higher,

When installation come third-party in. suppliers So that get or see out word SIL groups, has we'll as integrators certification we we get more? increase. system As more kicked that the we more, will see trained onboard,

to we again, telling, – again, expect et XXXX turnarounds, to going year we the cetera, see next this the see second is a expect half fortune growth. on depending of – So year, and expect we the spend and with strong to

Samir Patel

Cool. Thanks.

Brenton Hatch

Samir. Thanks,

Operator

Thank you.

questions no there I'll closing the time, for remarks. As this floor management to are turn additional back at

Brenton Hatch

you support discuss so of you joining of XXXX. for on Profire. thank today second to We'd like call of everyone to much. you each continued Thank this for us Thank our your quarter

As always, we're us you'd you. like available Have to great directly. everybody. to day, answer questions Thank a reach if to out

Operator

teleconference. This concludes today's

this for disconnect may lines at time. your Thank participation. you your You

Profire Energy (PFIE) 10 Aug 192019 Q2 Earnings call transcript