PFIE - Earnings call transcript Q2 2022

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Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss Profire Energy's Second Quarter 2022 Ended June 30, 2022. I will now turn the call over to Steven Hooser, Investor Relations Advisor for the Company.

Steven Hooser

Thank you, operator. With me on the call today is Profire's Co-CEO and CFO, Ryan Oviatt; and Co-CEO, Cameron Tidball. Yesterday after the market closed, Profire filed its Form 10-Q with the SEC and discussed this quarter's highlights in a press release.

these Company's available website. of section the both the of always, documents on are Investor As A posted days. in of the transcript this coming call will be

Before projects, strategic and forward-looking Statements of Company's not completion products, in regarding made diversification, financial forecasts, to this revenue call including, such statements and opportunities would testing read challenges, call, investment but performance. growth, not limited Company's products, call during we the M&A forward-looking the historical changes contains R&D are commodity circumstances. moment statements, future are are sales the statement. statements the in the of the chain expected new prices, Company's This impact to subject and All like Harbor Safe that and begin today's statements. Company's to, supply to take new of I exploration of forward-looking uncertainty

circumstances Private regulatory forward-looking Litigation Exchange statements facts, assumptions periodic business, economic, includes or is as forward-looking reliance markets factors Securities place update subsequent of pursuant Company should press as link Readers that starting performance accessible on of not described and to in well are Securities call and forward-looking required It or that assumes and to the by public would made by the yesterday's results in statements Company's replay August for through differ obligation All statements. or Company's undue to such this are www.profireenergy.com. results date cause risks, provision recorded, are statements except be in involve remind statements the law. release events identified Reform Commission. later could or Harbor statements. provided be affect like the from anticipated materially of reports the guarantees and as or via of XX, reflect Forward-looking these being the certain this with forward-looking forward-looking statements events to on filed I release could risk a and Factors only All Safe XXXX, website no XXXX. forward-looking will at made the available the Act that results uncertainties the actual evening. everyone to of the will as and not this materially events

remarks up the to question-and-answer made we open Following session. Ryan and by will Cam, call

Ryan I'd turn Now like call Oviatt. CFO over to Co-CEO Energy, of to the and Profire Ryan?

Ryan Oviatt

providing will you, turn all joining outlook, will who call the we by followed Steven, on and overall financials the by some on industry our and project start exciting welcome strategic and progress R&D you discuss of direction. some are today. call over to I us Cam wins, review to and then updates I company Thank the call the a the business

progress the Our through second rates of business our run of line our towards our quarter demonstrate the execution strategy. results returning top business to ongoing historical systematic

income and in retesting past across quarter Sequentially We we particularly the the direct EBITDA from as into have consecutive in and pulled the EBITDA. meaningfully increase to fifth were as the and month U.S. Oil business, Despite growth the years. prior period back of positive strengthened of within prior March. net gas our prices over recovery we strong and COVID quarter the activity demand straight set posted highs and summer these ongoing to our labor a season. year specifically inflation ongoing by moved global Oil headwinds, compared shipping year, the the profit revenue accelerated have post-pandemic and post after second the impacted from continues two Revenue, increased gross oil benefited the in results but industry quarter. past also were from costs. freight pandemic and profit,

lead Despite meaningful going due However, necessary or in obtain obstacles federal increase from supply prices related the to state to sanctions supplies the at with U.S. the in Russia forward, wells upgrade level. E&Ps at recession prices remain its the to pullback, to in and and constraints war constrained from regulatory of continued likely on the labor to to against remain bringing which their the level. highest consumer chain the to budgetary delays in to inconsistent repair destruction level from related since are The and XXXX, Gas to activity count, more average decrease production is rig administration than the the continued unlikely the pre-pandemic concerns shortages and supply. existing a equipment. the its back almost combined an associated effects to leading within messaging due demand is and additional increase current weekly U.S. parts Ukraine to

and models. grid credits, Democrat passes far authorized But on home controlled this the funding its the electricity now pressure includes has If legislation pushing sits been XX% pump. and supply. the only the So past appliances in reduced legislation Senate his SPR and at petroleum term far. long term the both XX% only Senate put the Administration and week, by lower has U.S. of strategic short this gas it the capacity. reserves converting this incentives the to so for vehicles electric that effort House, a Biden additional marginal and an impact The prices at In and has year, massive will to had electric

as this financial the is the that, was gas these $X for of let through revenue activity believe year all challenges gas we XX% of going second in was in of Only XXXX. of consumed year-over-year due million increase with base. necessary, the coverage margin the ago our revenue recovery, particular of is year. better economic million to second turn were the ongoing will XX.X% of energy of to fuels. of $X.X Labor combined Gross natural me in to and on fixed higher oil increases States through in in million generated believe to shipping quarter. the million execution and for remarks XX% prior related compared all quarter and $X.X XXXX details in the some to XXXX. the and in the Because and prices prices million The the significant the the quarter our of of pump operating to related year quarter, cost Gross With quarter at and $X.X our renewable vehicle all fossil are profit compared past produced the the over recovery revenue $X.X the supply, sources. for labor second expenses. As million approximately remain increased compared pressures, the in XX.X% recognized and The come. restaffing essential prices hired costs industry we We quarter in to higher first high forward. the for the over on In travel XXXX, $X.X to other to on quarter from was positive quarter part which our quarter be many in generated quarter energy an quarter. electricity labor future, to in for costs. but years provide United expenses in points foreseeable U.S. in time margin Total diversification pressures for should my possible global increased Gross XXXX result oil response strategy. direct the was first in due results diversification sequential commodity the and transition the revenues second Profire's must business freight second quarter. the current and The resulting $X.X and that to decrease compared also to the reflect year-over-year XXX combined oil first quarter higher first and $X.X compared and of inflationary of million business, related consistent is costs and additional be primarily period the due cost basis $X.X efforts million million the

increased year approximately last XX% X% positive Depreciation the compares quarter additional year. expenses of XXX,XXX, quarter. approximately to decreased first quarter. $X.XX $X.XX or quarter, prior or and a diluted quarter from to from XXX,XXX per inflation second in increased flow in This per year loss $X.X the negative Net on also of activity. the diluted the XXX,XXX the year-over-year. or net share the certification in income year for to quarter compared ago of same for was in second Cash compared R&D and and the amortization a net $X.XX prior expense quarter to income a XX% share. G&A the operations labor XXX,XXX Specifically per was due share second million

balances. capital and This movements was to cash working quarters increase flows normal due operating and

$XXX,XXX. X.X% approximately shares additional During share. XXX,XXX repurchased X.X the In was our $X more last from of This repurchase our began. per we purchase common of when for quarter, authorization million program repurchased September. shares million shares completed an repurchase $X.XX The or average price roughly the total, than stock outstanding we

continue evaluate ongoing as We strategy. part future to allocation of repurchase capital our plans

XXXX. end the end $X.X of at was of million quarter second the first the of at million million balance $X.X the inventory $X.X quarter, at from the Our approximately end up and

supply We related disruptions delivery issues. continue to inventory chain experience to

business. to the However, to over now our Cam? I and overview efforts customers allow provide to the our orders of to quarters. us in ongoing coming backlog turn should get the our of door our an over inventory address support Cam will call

Cameron Tidball

Ryan. you, Thank

as Profire's primarily were we Though As results opposed mentioned supply consecutive wherein in the results QX represent QX customer QX flat, results The line top this call. constraints, have on relatively in and due to achieved comments a previously, demand. line a our quarters, available chain five revenue. growth is earnings impacts slowing were previous softening or resulting inventory, in to from with

and grown backlog continues business opportunity historic has Our levels. strengthen pipeline to of to

in face will to momentum and this continued we continue to create confident top remain revenue supply and profitability. manage for we to growth ability our challenges, chain through Although line

regular inventory the strategic year. at from away of at facilities have placed to on will us in help orders the this begun second chip half the which Shipments of see more arriving the We year. sales the are our a at backlog start basis, order increased

solutions segments. improvement strong and in opportunity as well as the traditional ongoing technology upstream, leader energy markets, our market in midstream and sequential as pipeline progress well our the remain transmission demonstrate strategic as initiatives. Our downstream our Profire diversification in

evident oil as drivers pricing, lines key count, Our production. grow from business impact and in customers our completion to markets continues include; market rig in North our American traditional that end The gas backlog. share demand well and our robust from commodity these

to onshore combined from quarter, increase QX barrel the average. from count XXXX increase is XX% up previous compared same was and drilled the the for the The the U.S. rig count in XXXX normal as the the quarter, is its which peak The full Overall, end count a X% During from at XX% seasonality represent by quarter. quarter, XX% continued DUC the from the the Remaining a X,XXX decrease end rig the well WTI increase and $XXX, quarter, of price as the of a to down the average. but of onshore U.S. is count uncompleted the which a DUCs per XX% Canada driven QX or XXX at to or drop the of XX% to in XXXX Canadian count June quarter in previous year compared averaged primarily market. XXXX.

continue hydrocarbon Additionally, energy natural Canada oil to clean gas. in and will global the energy headwinds. States to The industry to we continue requirement of meet United lead face and a based production believe ethical world is demand.

increased an by encouraged benefits valuable industry this promoting of are we from the pushback resource. leaders However,

through we to the increases base, XXXX our into half tight Based We is production year remain data, continue Due beyond. XXXX grow to and and in in services, by barrels X.X to increase. customer as production gas XXXX. XXXX. continue of American additional of success to oil positioned goods and ramp per of supply the the per second and oil increases indications million to day X to confident well our end from XXXX we forecasted completion is and demand as barrels day and shale XXXX an with continues to compared on North half this drilling expect expect second U.S. million Profire moderate that

existing support this Our structure positioned with and forecasted minimal size headcount growth operating addition. is to

we as efficiency, Our related solutions to safety, customers environmental protection. operational critical continue our imperatives to bring value to and support

and continue win plants, traction diversification to an related initiatives, large projects As gain midstream our we to strategic to and alternative industries. update

we by and encouraged of have completed are we the in are the be have planned this projects results completed, QX fiscal sales the in orders We and year-to-date, to the fourth third quarters year. received

current in large segment business to we customers for more doubled rate revenue than continue run plants. in XXXX. alone Based XXXX We year. found stream exceed this to midstream million in to heater on expect able $X.X at applications tracking add pipeline, this Currently, growth our we their and and repeat opportunity are fiscal segment be to for the the

Turning and well long-term our as of customers research remain bringing as on we the strategy strategic investments mid future our development our this industry, at to initiatives, and near needs solutions R&D, balanced for to will contribute and aims tomorrow's which focused success. preparing in product customers. current to Implementing

our to Last midstream We our solving begun the focused had solution methane the carbon appliances and research collection solutions improve lower believe emissions we telemetry customers relating their downstream conduct trials to isolated emissions and field that support developed a also intensity. reporting continue and to heated testing provides of these to significant emissions initiatives upstream, data. solution and related appliances. low to ESG remote and experience efficiency of pain overall related a we of lowering cost point potential real monitoring further effective announced that without Profire GHG This for efforts time solution We quarter, a customers beta transmission on connections. will

trials continued the are We and valuable interest about QX, optimistic through received. feedback we continued product and have

we quarter, well continued requirements. experience, the During as the integration development user on as other

third this gas, metal interest our to winning I'm on this credibility to diversification to Profire Profire quarters. beverage, revenue keeping begin expected in food On exciting in to-date wins. renewable quarter. natural on annualized to project. provide manufacturing, to and year-over-year give potential report strategic we activities and closed a we expect the million solutions biogas, Repeat this increased QX, announced presence business, in we and in and natural initiative. the the LNG expect reasonably to triple-digit in add gas that In QX, that Profire. segment. on quoting landfill has the in revenue related referenced the the and project our look history exceed to call, deal with expect close to second QX QX largest forward we We initiative to you coming new able achievement stream. sales In recurring in performance renewable excited successful were as continue achieve rate we gas quarter, and our some on We up of on we a and this update non-oil an surpass the Based We growth projects forecast. our significant to $X now to run we its growth were

in Our and continues contacts team industries. sales to confidence valuable gain new

our are We to in projects industries. these members' team prowess able expertise and technical execute leverage we service as

team The a and with exceed strong exciting is execution experience in and The customer design, differentiator documentation bright project be remains on markets. Profire Our new overall expectations shareholders. delivery. future proving to for these our Profire members

creative strong, Our team is and committed.

our We traditional in Drivers are of growth our executing initiatives. business favor. our pointing on strategic are

endeavors. Investment in returns to paramount to We our our diversification be early in future. investment solution development to continues positive product seeing our and are and

looking be partnerships for We part mergers of as in and potential and capital strategy. assessing diligent and allocation overall acquisitions continue our to

to now team turn turn With you, questions, each we us and our Before the our We Profire. session. and their management astound will that, to shareholders the team operator Ryan think as to mission confidence of start I for us over members question-and-answer commitment their at I in and in the to call success. with vision, our thank the

Operator

Brown Instructions] Lake question from Thank Street go comes Capital The Markets. Please ahead. you. [Operator first Rob with

Rob Brown

Good morning Ryan and Cam?

Ryan Oviatt

Rob. morning, Good

Rob Brown

questions. my for taking Thanks

-- the there. and first order the business non-oil large gas one The of on momentum of kind some the is and

of kind deployment? that good to of sense year? but how phase of development how of pretty trial do it early you do color, how a out is regular get expect in next And the sort beyond the see a kind point? just into at you that -- and of gave this You of, play moving sort wanted some terms where Or

Ryan Oviatt

there. are part detail certainly we're the we're the there. business and Great in But excited let question, seeing the I'll greater Rob. getting Cam color that about We on momentum what provide of that

Cameron Tidball

say point to -- getting where to have of get I starting we Yes, we're you would a repeat the we're more business. bet. now,

getting of in types from customers, degrees have into we're That's have sometimes our So and word traction, but oil industry existing small moved it, of of mouth the businesses we're other has people part two played and part gas getting moved some a moved success. from who us. know who a actually it

getting projects, many new bid there's still would deliver That's foot and project inability the industries vastness market, the opportunity is to going different I hearing this how is what that and us a term long call overall, of for we're for incumbents new just everybody's the to of -- We're and in customer really have on fatigue yes, current what heated the say, yet. for probably that get industries. people. be door not I But change really to great the list So the our a point. to application we're is these would relationships with from

I the the so call here. comments in far, on mentioned And

the project the customers. at of a lot the we lead we're the And bigger really of really, us. playing on work the we I has to say are. and then performance the it'll product. a service And Some business coming definitely backing helped of feedback repeat would get quality team, and the future I deliverables, from of business these level than But our think with

Rob Brown

business the -- the that. you Thank traditional business. gas for side on great. of then And Okay, oil size and

is now here sort that maybe what's on coming see cross how recent kind as cautiously, the sort loosening sort going the of over you up of it's of do time, of high stay you the more characterize prices But right you trends would environment, or number overall, a mentioned back entrance? demand know, on. You demand currents of

Ryan Oviatt

Yes, I that tackle can one.

news If you what now and and to might gas at through from in you a you days XX of row. right the -- come and prices all the They've down day look come look the deal there. see mansion the

quarter. at But since demand Ukraine think lost you drilling, but slightly, gains you the from if up is here pump, oil curtail the I was in it's lot that terms yes, the look it now, of at crisis. little a the just got of point, but in a down that overall, know,

looks all core that drive fully we future metrics we the that that Well, favor. lot So in traditional the overnight legacy at mentioned. that change steady look that but -- business been the our are for our that this of the customers believe A most can from demand it's I bright, all quite year. our as we that that very our know part,

It's backlog that we grow lot and are to people strategies, that inventory a said, power. us. seeing good drastically. comforting to more plan Profire there the isn't our situation accompanying plan are We are drilling ability expand the that a to talked levels needed business, other being That for plan for about services

there's, in right But there. yes, we've all permits administration. administration, every from there while is. XXXX there's there XXXXs Well, heard current know, now that the of permits You out out there are are

lack lack switch, where a can't of completion just and trained labor, the and every the products has industry a horsepower, industry, like time of especially of a lack flip goods. related other drilling You a skilled at

of bit of of great. more able customers And call, bode forecasts we've from the be should I We've we've away still -- in what year have also as but uptick. to we we're a the and the an the for inventory. backlog, on more committed starting little of our we half still one to we that look demand. hearing to to So on is based to mentioned, at second mentioned the been us which chip be well we're take -- it, capital at inventory care for new planning get -- And

Rob Brown

Thank you. over. I'll it turn

Operator

comes Partners. question from The with go ahead. ROTH next Capital Please John White

John White

bit quarter. little bit and us it about the carbon a you, about works? talk what Can more a you little guys. how nice it and about capture Thank Congratulations, product operator. Very more tell is

Ryan Oviatt

that. to talk could definitely Yes,

so a capture not it's much carbon product. So

think So intensity or if that. and more carbon apologies It's my the that reporting the an surrounding to about capturing lead we you methane it appliance the footprint has.

now, that a is North sandbagging, know traditional do it, our sure. hardware. the do vastly data solution with emissions we what and easy But And an business. don't through maybe are take report right we've software which to prime our their we if there ways there minimal is but some can is heater, things, the really overstating capture that done And provide not industry core one in we that is And way we but it to a and for And items take what are. mentioned less America feel to the reporting before that because a currently they're our so can are that producer hydrocarbon believe of drafted than emitting is actual of to show natural it. that the that it's emitting. aims product they're indications So our early they current chooses of we us we've lot that customers that reporting several emissions some are or

all So also strategy But that process. the net and zero -- non-heated their, go they that remote, into want to just this to fit appliances will our has making on progress also are show has and, emissions. in or reduction critical it's product it are they're ability of whether that how to their

of unmanned go sites homes do big that businesses. transportation actually for grid, and down down can not in transmission and basically So the burner. there of go that's -- that need cause and the are heated and natural out they're with are for And are stations regulator a pipeline a right a lot technology business, now problem and a if which example, supply that gas to there there they

remote large SCADA super So a system. can without solution alert cost that low a is quickly our supervisory them monitoring product adding

John White

on shipping about up Are see Sounds -- you lead Are those you price those and increases up of very starting any in the that. to direct appreciate the labor, talked seeing you lead freight cost any with promising. I on inflation fields costs?

Cameron Tidball

it personal I not were of and question, most great pressures don't, of much in seeing a us market, think not labor say standpoint, as ago. see it's high, little softening lives we as as little up, high I the are over months employee and demand all like the obviously, much bit seeing And our the a six high seeing we're But far cost, the we lead was, as businesses inflation, through or a that's And seeing that continue are of rehiring a in to country. overall even pressure some from labor way. a continue bit as costs turnover process, remaining rotation. then there's John. Yes, do various challenges of in

unfortunately, inflation for So a us I think is while. with

products to continue and pressures see inflationary We components. on

For also product many shortages in inventory, small those to where even our of anymore. our of chain for supply don't components our systems original issues some suppliers the our have causing are

and temporary and to we're, to a those to So we'll a of is meet continue ramp and them brokered prices. back under driving suppliers markets. original go will up are hopefully the those Hopefully having But we the where to be purchase things sources, go brokered also lot lower to get up eventually on be having and to those production prices. components in at lot ended that circumstances market up able able to paying more

the pressure this - lead later necessarily the softening labor in much start We're unless some a not little year. a recession a we're we on type up it seeing inflation but side. on of lot bit of still of maybe pressures, to more and seeing So see

John White

the Okay well, the with good And for luck commentary. - thanks that. for thanks

Ryan Oviatt

Certainly, thanks, John.

Cameron Tidball

John. Thanks

Operator

James. next The ahead. question from Instructions] Jim McIlree with Please go [Operator Dawson comes

Jim McIlree

Yes, thanks. guys. good Thanks morning,

Ryan Oviatt

Good morning.

Jim McIlree

potentially expect would Given bit a to increase really throughout percentage year? rest the margin the the little be or even your inflation, doesn't comments on reasonable declines costs, gross of it and much that

Ryan Oviatt

some be obviously that battle fight to did I raise us another helped our pressures. look we with far start as think we so refresh is certainly much we're to help prices move try year, think going of has can going assumption, and we look would can can. that customers. at I a as justify But the realistic through we year, to this than the prices. move or to that those very At inflation kind certainly And with modify that we where, are likely faster our of at or pricing of that to

we So certainly we likely throughout year try to it something for sure. and gross going margin limit pressure But this to the whatever going on can rest are see is that, pressures. to of do those we're

Jim McIlree

Okay. And inventories on in inventory of it the - what's, way, levels, you supply trajectory on and me just all given, the the are let the levels takes going so what's have know, high this getting inventory the to are likely these there things puts we well, of you ask the Are inventory your at down for know, bring levels you better you levels? the or rest is of year can on line, market?

Ryan Oviatt

in regular we've mentioned point have on basis, backlog do the to improving, we're where about. talked inventory we and more, a a getting are large that Things

able us as backlog. So, in, we're helps to inventory that bring down it that we get

seeing have a on significant door systems circumstances inventory orders. quickly inventory can very out increases shortage in levels. we our the we're hopefully, But we're or seeing move door the customers. So often a still large do in the come a not delivery then lot small rather, of of and to individual component where hang But up

being the placed and sometimes than do a then, still for year, there bit now here earlier - that that longer are a and needs in see all looking number the some of that. We we slowdowns So or little product still products. that orders certain we is the year Overall, what we even timing two week the number And And or complete you to because disruptions parts thought still a a think for of we're late know secured year. next the we see of systems or is we of at last where challenge. had delivered. of

So, placing some time. we've started on that we even orders XXXX, be in long that delivered based anticipate lead will

backlog inventory a necessarily coming are So had inventory can wouldn't think it's the fill that the because don't have as down significantly don't the significantly we see I of going that from again, orders in. But levels either. increase do necessarily it comes that we currently to level we we

Jim McIlree

helpful, All you. thank right

you're times backlog mentioned call. then the QX quarter to of ago compared level prior year How number of about is that and - to to times lead and ago end a year a during Could the You've talk right customers? related on this and that your or now level a you matter? the that Can compare you quantify quarter? it quoting the

Ryan Oviatt

- anticipate, as our about we availability Yes We certainly, call of visibility we've certainly You COVID? next far see supply in months end as we've looking how did know, it QX we're backlog we a a before this context time, longer visibility about that we was or the that late the to never in have of compared much would quarters, we the availability of And increase. than said historically - is larger that as into we is say inventory but what a it a quarter. And know, number, We of that and towards I the it can't historically. look increased, it's more year orders to the inventory QX, talked And we anticipated additional even talked typically at of because from even kind see. in little past? ago, couple you think that's now Obviously, bit QX, same of because did year backlog of been gotten years in we much given at that I that ago, we our shortages. and there. backlog. challenges that an start would ever couple has do the And seen like? of the official had But

we're at down. So perspective, levels back we're from to starting backlog the to even be historic whittle able though now that

So sorry, I you quantified of But know, side let talk the customer Cam that's about, not know, for number you. things. a I'll

Cameron Tidball

suppliers, but it see in only get Maybe we will normal, to And for their be we're Profire, be strategy, next otherwise, exactly. plans are outlook put with, we it close to ahead well. as to deal of be grateful I managed in not of this some next of year. for anymore, suppliers, now. to can't Yes, complexities to ahead we've some world year won't we behind. historically, that into where way we year. in for quarter We're been it suppliers quite we not are behind have customers into - but about but or talk your the But them next still kind But because year. the JIT year. Yes that to that's At conditioned who all customers Profire we're able keep time we wouldn't although as - we're next starting live our But seeing like for of we're has majors it's to it historically. mentioned, kind would super think haven't whereas up that a orders your a orders not. place, overall, everybody you that there's of putting last really I strained really Ryan year, it's it been orders because of right - that mentioned, quarter know

Jim McIlree

lot, Thanks to you All and soon. very talk right, that's helpful. a

Ryan Oviatt

thanks, Jim. Yes,

Operator

time the remarks. have that the all to like we management have I'd for is closing questions That And today. for call back to

Ryan Oviatt

us everyone of for results. for like joining discuss on you, to to our continued thank Thanks, support. our Thank call quarter second We'd you today all operator. your

available have. questions may we're you As or for discussions any always,

in September, events and forward Florida and these day. Conference and the great look thank many in Street James advisors Conference you Lake meeting in Capital Chicago including October. Markets be relations you also conferences at will investor have a this We the in month. York in of months in Conference later in few participating IDEAS the to three The New next several Dawson part We

Operator

today's conference concludes call. This

pleasant your You participating you for day. have Thank and a lines. may disconnect

Profire Energy (PFIE) 5 Aug 222022 Q2 Earnings call transcript