Profire(PFIE) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2020, the company recognized $4 million in revenue, down from $4.4 million in Q2 2020 and $9.9 million in Q3 2019, reflecting the ongoing impact of COVID-19 [11] - Gross profit decreased to $1.5 million compared to $2.1 million in Q2 2020 and $5.2 million in Q3 2019 [11] - Net loss for Q3 was approximately $1.1 million, or a loss of $0.02 per share, compared to a loss of $809,000 in Q2 2020 and net income of $922,000 in Q3 2019 [14] - Cash flow from operations was negative $724,000 due to a steep decline in revenue [14] - Cash and liquid investments totaled $17.2 million, down from $18.1 million at the end of Q2 2020 [15] Business Line Data and Key Metrics Changes - General and Administrative (G&A) expenses decreased 18% sequentially and 31% year-over-year [12] - Research and Development (R&D) expenses increased 89% sequentially but decreased 32% year-over-year, primarily due to the timing of product certifications [13] - Total operating expenses for Q3 were approximately $2.8 million, reflecting a $300,000 reduction sequentially and a $1.2 million reduction from Q3 2019 [12] Market Data and Key Metrics Changes - The average oil price in Q3 2020 was approximately $41 per barrel, down 27% compared to Q3 2019 [6] - The weekly average rig count for North America decreased to 287, compared to 878 at the end of 2019 and 1,024 in Q3 2019 [17] Company Strategy and Development Direction - The company is focusing on maintaining and growing its market share in burner management systems (BMS) while exploring strategic partnerships to expand capabilities [20][21] - The company is researching opportunities in emissions monitoring and reduction, as well as optimization through machine learning and artificial intelligence [20] - The current market environment may create strategic acquisition opportunities for the company, given its strong balance sheet [22] Management's Comments on Operating Environment and Future Outlook - The ongoing uncertainty from the COVID-19 pandemic and economic conditions is expected to constrain demand recovery in hydrocarbons [6] - Management believes that the successful rollout of a vaccine could positively impact demand and restore confidence in the market [26][27] - The company remains committed to its sales strategy and has not made detrimental adjustments despite reduced revenue [22] Other Important Information - The company has successfully installed its PF2200 products in multiple markets through Latin American distribution partners, adding over 100 new customers year-to-date [19] - The company is exploring partnerships in industries outside of oil and gas, such as aviation and power generation, to diversify its revenue streams [21] Q&A Session Summary Question: Visibility on demand environment and year-end budget flush - Management noted that demand recovery is still hindered by COVID-19, with a slight uptick in drilling activity observed but overall demand remains weak [26] Question: Update on Midflow and Millstream acquisitions - The Millstream acquisition has been well-received, with higher sales percentages than ever before, while the Midflow acquisition has expanded the company's service footprint in the Northeast [28] Question: Positioning relative to industry consolidation - Management stated that they are well-positioned with larger companies and are carefully monitoring credit extensions to customers [35] Question: R&D spending and new product development - Management indicated that while R&D expenses may fluctuate, they are not looking to significantly increase overall R&D spending but will manage costs effectively [39] Question: Progress on international sales and potential for breaking out results - Management expressed hope that international sales would grow large enough to warrant separate reporting in the future, with positive progress noted in Latin America [61] Question: Transitioning to a recurring revenue model - Management acknowledged the importance of exploring a recurring revenue model and is considering how to pivot their legacy business to lessen revenue volatility [64]