ENSV - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Enservco Corporation 2018 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host Mr. High Pfeiffer from Pfeiffer, Investor Relations. Jay Mr. you, Thank Pfeiffer.

You may begin.

Jay Pfeiffer

XXXX and the call. conference to Bradford, company Enservco’s welcome the third CFO. Dustin Presenting and are Dickinson, quarter Ian Hello today CEO; on behalf of

out the Enservco during statements discus to respond cause management’s based XX-K in during those material anticipated today’s The the uncertainties certain because prohibits are estimates, ability SEC. date this events. matters reminder, untrue are management’s questions statements. A filings well by a materially this the limited may of as to statements call that call disclosure which after on obligation non-public as at include point will assumptions risks to replay subsequent and FD, is assumes recent actual information. that forward-looking SEC disclosed webcast enservco.com subject that become be business Company’s as subject selective to from call today’s other call. projections and available update differ results Reg most forward-looking that in forward-looking to of with of Company’s and its is As also no risks of to I’ll could

turn hours go replay call available please will I’ll addition, the In telephone over a call. Ian, beginning after approximately to Dickinson. ahead. Instructions or are the be release. available that, news With two replay the Ian webcast accessing for in today’s

Ian Dickinson

and everyone, afternoon, Good the Jay. to Thanks, call. welcome

in prerelease on and financial we have the closed release our were press cover, XX. I’ll generally third after We so jump right great of issued October line in. we Today, a lot to the updates market issued with results quarter

in quarter Hot to has combined a Today’s on drag a our also enhance non-strategic water and all our higher decide commoditized Dillco and low equipment include has highly best margin margin our located of focusing our Adler those of actions more a position strategic businesses. all metrics course will acquisition it business begin third end a We to higher to hauling and business, explored opening phasing my Dillco locations, water a water and/or water measures options these our us some cost to hauling a profitability Even growth we of and but Oil delever which a the the operations undertook is service recap press stronger Hugoton, real Dustin think unprofitable been Service. walk important the liquidate Those results in following; our improve in is times, our competitor after with in usual earnings. strategic and the reduction become that closure the line consistently assets, our put fit measures of transfer reduction primary of As lines. business, enhancement of sell and release the not during detailed the Kansas. well thorough through out remarks. measures and to down include business our field of growth, and cost After I’ll hauling margin profit of sheet. series shut a balance estate implemented of we designed by measures. accelerate service revenue with review We

and units relocation Oklahoma to facility certain our to of Dakota. North of nearby closure and Okarche, hot and City, Garden oiling Kansas facility Secondly, our acidizing

now Texas and and Bryan, serve these estate Texas believe field the real the operations Closure in facility of the all of accretive which free which the first relocation for our Kansas own over assets both nine Garden sold Chalk also Texas We earnings. to to the our moves City, and yards, Austin months its Jourdanton Dillco of October in in larger clear we Basin. and in EBITDA XXX,XXX. and In will will losses. Ford We contributed three XXXX Eagle of now XXX,XXX be closed

So standpoint, from moves a purely financial these were for prudent us.

We of to and and real the continue and is Garden of areas including estate estate, some in for locations sale ways optimize look from The is initiatives with Dillco sale. our equipment where also do deployment cash line two XXX,XXX aforementioned the inflows real to realize will we’ll closure to City modest field ongoing to this. demand the lead highest

acquisition our that this other The of effective I was Service October highlight want Oil year. to XX transaction on of Hot is Adler

in which our profit will customers no We We shareholders and give completed will to for and transaction from dilution believe favorable months Adler QX. revenue applications company, of with shareholders. Enservco at our has contribution was – which our this two compelling us roughly valuation

all, collaborating. our significant begun family the been we instead Adler Serve competing, more of with than with mission EMPs other Enservco of base. out services. of overlap EMPs, only XX we there a with companies have does of competitor, Adler First that as Chip part little multiple customer With EMP Adler, has one now the do. serves customers Blue what very critical

to dovetails XX In the are strategic top XX fire IP which are which master who heat Adler oilers. service in for expertise exceptional opportunities affords business going efficiency is provides essential keep balance north well Adler will our level operating deploy Adler frac hot have used exceptional The accelerates including valuable equipment fuel season transfer responsible in and water plans, management some solidifies EMPs the heating fleet and addition oiling. a has strengthen burners. and The equipment and heaters services. What well, water their added support relationships. the own who market new track of delever Adler’s earlier of building we including for lot team, field from patented our think as transaction us dominant winning has of frac customers. sheet the from should team to throughout provide hot last well. with System, a solid Like XX type bring and table, there cross perspective, acidizing respected the an longer. the our record, we as certain OmniHeat around And community a revenue operators modern position Adler qualifying as covenant the forward. a was Shale. earning to EMP the where good further of begins other heating some and field and player transaction derived XX% including also of and their and plan and mind So and of hope with benefits water finally safety to enhanced and fleet our that the Enservco’s profitability are flexibility employees, XXXX, to waves potential vast ratios our are us This debt agreements benefits complimentary with which Bakken includes

upfront way when addition, to active our Adler at in peak. transaction In to minimal flows cash enables their with cash were price a portion outlay the structure during heating pay purchase us a large that more are season able we of the

noting season timing So this efficiencies. summary, having better and in the customer into company we’re into not our The Adler at of bring heart heading the more commitments year. worth the cost heating combined with could thrilled time last It’s been have to fold.

of of almost component additive in think primary every a We deal. proposition brings be the value what not way. We’re this will Adler

administrative operational begun and executing and integration plans. on already synergy the have We

been I our the activity on While months. M&A COO, Dustin, down and in Kevin focused and Kersting, have heavily recent turn

business operations driving leadership customer on under Our revenue winning and growth. Kevin’s great in development job doing a teams commitments been have executing and

a transfer areas. A operating our all the customer across five across building the involving to have This activity a new the fourth quarter wins DJ momentum I for activity detail wins and ago. year Powder levels start bundling heating is well service than few and season more strong and in off good and water seeing to heating basins River our We’re those Basin other above with include in new customers examples to here. new frac time we’re of

proposition defeated it few words say recently turn that want Colorado. to was a I Before Dustin, to XXX over about I in soundly

concerned. the worried measure you new requirements wells. Enservco know deploy to who dramatically that investors those increase about areas gas For was XXX is and highest. a of I don’t we quickly some to we implications that and but for fleet can the highly all passing, is mobile demand know, at that honestly where were measure ballot setback our of Remember, oil weren’t

be the strong In non-strategic So heating do would and specifically is season XXX I’ll the of start Colorado over we I our shareholders. and review The our changing. We Dustin to and commitments have ever and next our to highlights. for been redeploying not accretive We in third operating northern and results we strategic drove in the ensure turn that prolific and believe a the oil upcoming look by dynamic those our and factors. gas want call. to of call there financial With marked and off while the reporting lot during season unprofitable areas of and increased most equipment is interest We prospect where by winds a DJ, the discussing daunting. for of we embrace the locations and more gas successful quarter, of these work three to industry acquisition summary, investors our that, that highlighted prepared to and producing oil elsewhere in down across work the earnings we work will is best ever prop and operational turned impactful. basins. is buildup and respond plenty diligently to of watchful at other prepare most to forward recognize significant the systemic customer of Adler, heating

Dustin Bradford

quarter year. million $X.X revenue in $X.X Total same third Ian. the from quarter to Thanks, decreased last million XX% the in

As record slowdown to the oiling associated has we of by South for facilities which plan producer rainfall activity acidizing personnel. such Basin, years. impacted Revenue in negatively the closure press to Eagle was a by hot water the that a big the QX equipment said and field related in of last release, us of customer couple by in curtailed Dillco downtime our revenue our revenue further Texas been the run-up of in Ford and XXX activity hauling in closure impacted in and turnover performing was

be reflected incur and/or impairment non-cash occur, and it charges to We cash in quarter. our will to whether restructuring were would related that the from we If facilities fourth closures. are any determine Dillco working

$X.X mix compared charge QX related same and year’s from revenue in while expire million of included of $XXX,XXX year. which Our hot the generated $XXX,XXX $XX,XXX loss loss versus segment oiling on a of workers’ of to to well basis, water we end operating our the enhancement last the enhancement XXXX. first of of in well XXXX heating last in to non-cash $XXX,XXX year-over-year $X.X This $XXX,XXX included $X.X $X.X partially a to The revenue Frac a QX down quarter. million services in in loss acidizing included a allowed versus policy, year, year. million enhancing last compared $XXX,XXX compensation of former $XXX,XXX in insured self quarter at million

to be exposure, earnings. resolved. paid of we cash a I’ve the requirements based deferral that As under about we on the of portion insurance years, our discussed into for policy expensive information for further over the total self In calls, claim new on into made fund had previous the third as policy reserve previous under and wait certain received that accounting the policy claims policy quarter, made portion our under we

and payments policy. from loss this quarter, future $XXX,XXX of our made end Even around revenue refunded depending on made a water segment loss year-over-year. defer had $XXX,XXX either we in periods even that $XXX,XXX Water us the remaining as or transfer expect remains a we move of break the amount of expense claims in under recorded $XX,XXX. service $XX,XXX a decline, of business reserves reporting year Building closer in for As continued the of the into decreased to segment in to top priority versus with to QX transfer to us. outcome those to ago year be the approximately business

minute a plan, year-over-year impact the being of loss QX The the our to third claim last $X.X still As year hauling decreased the from self ago insurance The from discussed profit deferral profit I year’s by X% quarter into claim workers workers $XXX,XXX revenue denied compensation the specific in year resulted in this $XX,XXX insured included initial comp significant The with being a increases and our been $XXX,XXX million ago. resolved. million, we’ve variable deferral insured $X.X Total a by quarter. water resulting to in compared a $XXX,XXX been those expected, ago the policies. of around that has result our and had a costs segment was described lower of of a segment from by of a segment year insurance is income reserved segment expenses declined contested payments, denied which not in ago primarily costs due of to offset self policy. operating previously to direct lower some revenue, health year third

Our equipment team. from fully expense due becoming and depreciation new depreciated. general our more $X.X $X.X associated expense year-over-year higher year-over-year X% administrative of million, result of a costs development business million as increased declined primarily our to to Sales, with

our in QX the tax quarter. million in Adjusted benefit $X.X in net last loss ago included $X.X valuation $X loss $X.X valuation assets. allowance a our compared was increase benefit $X.XX a full net QX year the $X.X third million in or increase or deferred Net in loss loss million by share The million diluted loss to tax ago net tax $X.X of of allowance up net million QX per a was this from an pretax a and year year QX versus offset Our in year million, was year. EBITDA in million share diluted our per was $X.XX $X.X ago. resulting

reminder, and our the due of EBITDA intensive the operating to important as a for adjusted health performance an business, our capital we As nature believe metric business. evaluate investors to our of

from by $XX.X million $X.X in hauling increased in the revenue from period a last first million improvement September million enhancement last period acidizing from versus X% a $X.X segment for $XX.X $X.X from XX% down expenses the to last to from in the Sales, loss increased million showed Turning period had million from All month $X.X was our year. year. million in XX% of $X.X million million slightly to cost year Total million XX% was of up million administrative million from expense million Depreciation $XX,XXX due year-over-year. revenue same services to months same million, nine to enhancement first which the business And $X.X $XX.X over year-over-year loss XX, to $XXX,XXX amortization period the primarily generated is components personnel expenses total revenue nine to last nine associated year-to-date out to loss ago. revenue million year The $X million. the included $XX.X and $XX.X three It significant up Water of $X.X segment XXXX enhancement months million. to with build $X.X well $X.X team The this year-to-date, Hot period frac last water nine general from was year-to-date, year, XX% primarily and growth. a segment to $XX.X same results, up costs $XX.X in the year. in and the of $XX.X through million. million. the good activity heating higher the versus and ended the loss Well from same XX% oiling transfer same development segment increased last of million company’s from year, XX% $XXX,XXX to XXXX last increase a $XXX,XXX months I up operating described. the the year. increased year. were XX% $X.X due well up million million segment million Water to $X $X.X income of period XX% $X.X

up share nine per million $X.X million tax same ago a $X.X was period in $X.X Net million the or a $X.XX year-to-date. same the in per XX% net from in X% last loss from million through net resulting an $X.X $X.X or net deferred represents year. months $X.XX pretax benefit in to $X.X million by year share valuation the loss diluted XXX% million The increase allowance up tax losses the months from ago. in are to EBITDA year assets. was from the offset year-over-year our the nine loss $XXX,XXX on swing Adjusted a period through current $X.X $X net pretax million million or million over We cash a diluted operations $X.X the year. the which from months period our the That first XXXX. of Our in used cash nine tax year-to-date, same generated positive $X.X operations through benefit, in in year net included is last of reduction was loss million

at capital balance was XX million. $X.X sheet, the working On September

Our ratio X.X current was X. to

do million we on unit. discipline place Our earnings utilization equity with our is X.X increase with focus our Hot in stockholder’s balance Oil to fleet by I that and represented to debt to highlight and to Adler new X, plans $X.X power additional continue equity to want was sheet ratio the

in to delevering make We years. expect our coming progress business

essentially but units Our the with remained quarter, acquisition. Adler we legacy fleet unchanged from last added XX

be to in of in CapEx question Global proceed And the we'll turn session. related and to Our primarily for the annual to million anticipate Partners. conducting line question-and-answer Alliance Instructions] operator for questions. the from CapEx, capital future, of Operator? range including spending foreseeable of Adler Bhakti that, first $X to will million, $X.X the question. Please the QX with be units. maintenance with the be Pavani over At time, a Thank call your you. we comes [Operator Our this will

Bhakti Pavani

guys. afternoon, Good

Ian Dickinson

Bhakti. afternoon, Good

Dustin Bradford

Hi, Bhakti.

Bhakti Pavani

heating water revenue you and utilization given your frac Adler? How because if the strongest season. the or normally generating will quarters, the of rates are maybe quarter first excluding wondering are a comment heaters quarter on fourth Just it's your how

Ian Dickinson

quarter first yet. don't and know not we through haven't Obviously Bhakti. yet, gotten we into So obviously quarter fourth

this they mentioned year, projected we I year. don't in level me, remarks, our I in prepared expect higher into last heating season. front higher those increased utilization in than We had utilization amounts we have as be rates commitments utilization do I did heading the anticipate but of season last than this were to

Bhakti Pavani

of regard one largest does performance? with acquisition how the as competitor. the the How now heating to your Adler, the season happy acquisition rational of expectation to is that I with And they our that Okay. of believe it their or has started fair and performing compared was are

Ian Dickinson

the with team Adler close. towards of we're Yes, spent deal with a good management happy the performance. in preparation the time We

between had customers. crossover very a coordinating was base there so the and efforts And customer of between Adler. on work customer Enservco teams We little legacy lot with the

remained Kevin and working on that So I is on they with has focused into had heading and commitments and season. both intact delivering the team this

Bhakti Pavani

Got maybe it. due could the quantify business the topline. to the development comment Also on or that if your – expanding has been of your you team on productivity increased

Ian Dickinson

Yes.

So business filled we're with we Adler's few as seeing good in it's our that had. a noting and that well traction great group place a worth actually gaps team development still got that

group. combination terms So nice BD of a there in the

in again number mentioned the I in of we season. remarks, for upcoming this preparation prepared As a new heating closed customers

business that heating and deals examples with some drivers and There team. Our development our happen. with and new transfer, primary our some form along partnered ops our of water bundled is frac making group ops business team between our was team in development winning again

we're between production So and equally the we've glove. been development firm them ops last year, coordination in the building group important, we're hand seeing over business great working our seeing team great and

Bhakti Pavani

for color. you the Thank Perfect.

is given balance fourth quarter do of comes following How to manage expect significantly your receivables. one was strongest the the the reduced liquidity not when other the has position sheet, related acquisition. you to your The quarter cash question receiving it to

going the on you liquidity maybe your what could comment position thoughts? if and So forward, cash are the

Dustin Bradford

The anyone availability just I'll balance at take our you're with then fungible of the And right. our and really that the loan and – you is position else thanks, listening quarter loan. the our under end Bhakti. I'll Hey, that. absolutely cash remind

grow. our As quarter, liquidity needs somewhat we head into become and challenge the fourth does working our capital

and million you'll expand capital facility from the doing to we're to the combination West that of the the did that in that $XX drawn limit amendment second quarter, fourth working our believe work and maximum review loan, the the flexibility As under know, the million that will if East the to AR adequate you to from we be cover $XX they needs.

Bhakti Pavani

Thank Dillco is with last Perfect. assets? you Do you to the regarding active with are in those a you. assets, And guys had customers makeup discussions centric negotiation regards selling or question pipeline? my

Ian Dickinson

folks several that base. We've Yes. asset interested been engaged in with

or So of that those to we're going Okarche, active still in rest that's City. of Oklahoma assets, assets an in exactly sorry, ongoing been we're sorry, the how I'm evaluating conversation. but Garden dispose The were in

Bhakti Pavani

Okay. That's very my you much. it Thank side. from

Ian Dickinson

got we there. Bhakti, disconnected Sorry

were Garden City answering flows some to But working the assets were we're right Jourdanton. confident in and off to generate moved process Just actively Texas Dillco to assets the sale Okarche, Oklahoma your were we'll that and we're question, in assets finish were through that the moved now. Bryan, to cash

Bhakti Pavani

Thank you from very my it much. That's side. Perfect.

Ian Dickinson

Appreciate Thanks, Bhakti. it.

Operator

Instructions] of next [Operator your with question Our Woo line Ascendant of Ed proceed comes question. Please the from Capital Incorporated.

Ed Woo

the your Yes, prices, My the outlook? question affect and you. it on your Thank does once you is outlook, your acquisition. in recent or decline thank business congratulations given oil

Ian Dickinson

question, Ed. is think, over $XX Notably, have roughly. we noted, haven’t people close here pay the to, think around closest what which Good prices today past Yes. attention I WTI, oil the declined I month. And

price even an I on because our or ready $XX as market mean, we ways deployed. individual any by depends our And it depends and really they pride that ourselves not received the looking basin we compare customers the slowdown is concerned agile a believe to be haven’t being it and fluctuations. But of here close any $XX a It’s eye impact previous factors north one things set we’ve We’ve indication fully I that how work obviously, no a in dynamic, But perhaps to the indication. indication business, that quarter for to interesting prices customers related to seen the current and stay from respond it’ll to first price. keep by an allow on that have those no But move any get production the quarter. fleet earnings operators, maintenance of a oil their long of but we’ve As today. barrel, of our calls, on to conditions slowdown got systemic barrel stated to I we we us over fourth we’re sure with we’ll gotten see, on again, to and face. making we we’ll completions where from on that planned is or interesting be in respond. as

Ed Woo

Great. for good the luck. Thank you color and

Ian Dickinson

Thank you.

Dustin Bradford

Ed. you, Thank

Operator

next of comes Our Madden, question. is your Mr. a Private Michael from line Please Investor. proceed question your Madden, the with Please proceed with your line question. open.

Michael Madden

apologize. I guys, on a Sorry, I got bit mute was in Yes, little there. I late. let

You been charges guys, that any or restructuring you've like have anything numbers around yet.

Ian Dickinson

anything [Indiscernible] want yet. add. not to No,

Kevin Kersting

based way on Yes. yet that turned a being Dillco We put them together reportable down segment. that the the

large amount involved of the of significant most we other. employee will future that, is And simple trucks could the part, from particular these we we’re so one be a just do of say moved workforce not on discontinued there’s these be close that people. a to a reports. other operation anticipate effort. facility I for of that as just pretty yard not in the in and moving stayed capital in that Most they them do locations, locations. number that an facilities tend very think I down, And to

Michael Madden

mention you did then And that be it. Got or about savings anticipated might the how created anything it earnings. Okay.

Ian Dickinson

Between over of over months, three prepared locations, nine those generated about them City, Garden the remarks, so three Well, $XXX,XXX collectively XXXX Texas. past the we of first mentioned Dillco, Bryan, EBITDA the the of nine one the that months loss. in of and things

pretty weight significant our they’re burn So and P&L on we’ve that removed.

Michael Madden

the the think does – recruit period, fully in moves. do understand that And some not of great. Okay, you you’ll you’ll future personnel

full realize like didn’t the magnitude, right that I that’s the guess. order $XXX,XXX But period. So savings over I know same of

Dustin Bradford

will look, I Bryan, units redeployed. been and the mean Garden City generating we in in – that have revenue were Texas – certainly

facility, monthly burn out mentioned And removal not. we’ve accretive the locations we forward. month, We’ve Texas, that generate kind on EBITDA sold call, to being Dillco that. the assets the shut business the are lease in as go of Garden City I Bryan, that of will that had Obviously, the down so completely be revenue that significantly and But the dispatched of from. those we as will will subleased

the So facility we’re burn with and no that in of process those there’s Dillco associated assets. liquidating

own real free estate clear, that to that well. and look and also sell as we’ll We so

Michael Madden

more and one reduce according, that’s then you a, guys that you’re a question, Got solid kind it valuation it. That of you’re profitability somewhat tailwind And realize guess, tax do I is in to if per possible able you but currently asset technical that of quarters. a benefit. just become think, you achieve – future allowance allowance tax

Dustin Bradford

Absolutely. We tax and do net to a differences. have a place losses deferred operating tax related asset the gross – in other

offsetting that due increase a sheet, when but net losses, that to netting so operating the with on But our be each asset, our And benefit to be question annual balance the valuation into we zero to P&L. absolutely, with your asset. and – valuation of frequently to more sheet clear, assessment we’re balance to is auditor’s, on regards tax P&L were allowance with quarter in the we it’s would that’s or that increasing our tax be an the how deferred a the of deem showing on if assessment annual face it a and treated it’s that necessary deferred should tax an to

Michael Madden

Got it.

luck. Good guys. thanks Great, Okay.

Dustin Bradford

question. the Appreciate Thanks.

Operator

Instructions] portion are over remarks. closing over management I back further would the to the of conference. no questions [Operator There for conference like turn to the audio

Jay Pfeiffer

you. Thank

into today. we the and moved Look profitability to your about strong a appreciate close call improved forward and and we’re XXXX. we attention always, on As to prospects excited XXXX time as for growth continued

again thanks for your afternoon. Have So time. nice a

Enservco (ENSV) 14 Nov 182018 Q3 Earnings call transcript