Q4 2020 Profire Energy Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss profile of Energy's fourth quarter and full year 2020 ended December 31, 2020, joining us today is the co CEO and CFO of profile of energy right all of the yet.
And co CEO of Cameron Tidball 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. This call contains forward looking statements, including but not limited to statements regarding the entry into new markets increased customer demand of customers useful.
Assets, the future commodity prices and the company's future financial performance all such forward looking statements are subject to the uncertainty and changes of.
In circumstances for.
These statements are not guarantees of future results for performance and involve risks assumptions and uncertainties that could cause actual events or results to differ materially from the events or results described in or anticipated by the for looking statements factors that could materially affect such forward looking statements include certain economic business public.
And the regulatory risk factors identified in the company's periodic reports.
Filed with the Securities and Exchange Commission.
All forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
All forward looking statements are made only as of the date of this release and the company assumes no obligation to update forward looking statements to reflect subsequent events or circumstances, except as required by law readers should not place undue reliance on these forward looking statements I would like to remind everyone that this call is being recorded and will be available for replay through March.
25th 2021 starting later this evening.
Will it be accessible via the link provided in yesterday's press release as well as the company's website at Www Dot profile of energy Dotcom following the remarks by the messages.
And Pitbull, we will open the call for your questions as part of the question and answer session Messrs Oviatt and <unk> will be joined by a profile of any of these vice president of operations, Jay Fugal, and Vice President of the product development Patrick Fisher.
Now I would like to turn the call over to the co CEO and CFO for fire energy Mr. Ryan of yet. Please go ahead.
Thank you operator, and we welcome all of you who are joining us on the call today.
I will start the call by providing some updates on the industry and our business followed by a review of the financials and then I will turn the call over to Kam to discuss the outlook and strategic direction.
Almost exactly one year ago, most of the United States began to shut down in response to the COVID-19 outbreak in many ways it seems much longer than that given the significant impact of <unk>.
<unk> has had on all of our personal lives and on profile.
We mourn with all of those of you who have suffered significant losses of all types of this past year, we acknowledged the sacrifices of our employees and their families over this last year to help profile, our move forward and make it through such challenging times and circumstances.
Just under a year ago Wty prices turned negative for the first time in history as oil demand came to a virtual halt due to the pandemic, causing a glut of supply without the required demand to keep the supply chain in motion.
These challenges compounded negatively with the first quarter price war between Russia, and Saudi Arabia.
We responded quickly and strategically each of these events significantly reducing our overall G&A expense. This included head count reductions elimination of nonessential expenses, including travel and the furlough of our employees, which reduced wages and hours worked these actions along with our debt free balance sheet have kept us in a position.
<unk> to weather these unprecedented times, while positioning the company to be able to take advantage of opportunities as the pandemic subsides.
As we have entered 2021 various states and countries have begun the loosening their COVID-19 restrictions leading to steadily improving demand, although still well below pre pandemic levels with.
With the presidential election, coming to a resolution and the continued reopening of economies of assisted by the rollout of the COVID-19 vaccine oil prices have rebounded to a much more favorable price range industry analysts have recently increased their price targets for west, Texas crude with some forecasting prices in the <unk>.
The dollar range. This summer, we expect consumer demand to increase significantly as vaccine distribution continues and shutdowns and travel restrictions are eased later this year.
We anticipate that oil majors, who will stand by their commitments of maintaining production levels.
We also believe that most producers are experiencing higher than budgeted commodity prices that will likely result in excess cash flow. We are optimistic that a portion of that cash will be used to reinvest in maintenance capital that was deferred throughout 2020.
Yeah.
With that let me turn to our financial results for the fourth quarter and full year 2020.
Yesterday after the market closed we filed our 10-K with the SEC and discuss the quarter and full year highlights in a press release.
As always both of those documents are available on the investors section of our web site.
The transcript of this call will be posted in the coming days.
In the fourth quarter, we recognized $5 7 million in revenue, which represents a 41% increase over Q3, and a 30% increase over Q2.
This is still significantly down from the fourth quarter of last year, but demonstrates a clear turnaround from the downward trend of the pandemic caused during most of 2020.
For the first time in the past for years, we saw an increased amount of customer year end spending.
We believe this is the culmination of the stabilization of the political environment and positive news regarding pandemic recovery efforts.
Gross profit increased to $2 8 million as compared to $1 5 million in the third quarter of 2020, and $3 4 million in the year ago quarter.
Gross margin increased sequentially to 48, 7% of revenues from 38%.
This is primarily a result of product mix in the quarter and higher coverage of fixed cost portion of cost of goods sold.
Gross margin in the fourth quarter of 2019 was 42%.
Total operating expenses for the third quarter were approximately $2 8 million.
This represents an $88000 improvement sequentially and nearly a $1.8 million reduction from the fourth quarter of 2019.
The sequential and year over year improvement reflects our significant effort to reduce expenses in response to COVID-19, and the supply imbalance in the market.
Specifically G&A expenses for the fourth quarter increased 5% sequentially, but decreased 32% year over year R&D expense decreased 48% on a sequential basis from 47% from the prior year quarter.
Depreciation and amortization remained unchanged sequentially and decreased 73% as compared to the same quarter a year ago, reflecting the integration of midstream in the mid flow in of patent write down in the latter half of 2019.
Net income for the fourth quarter was approximately 56000 or breakeven on a per share diluted basis. This compares to a loss of approximately $1 1 million or <unk> <unk> per share in the third quarter of 2020, and the net loss of $1 6 million or <unk> <unk> per share in the fourth quarter of last year.
Cash flow from operations in the fourth quarter was approximately 142000 compared to 311000 in the prior year quarter for.
For the full year 2020, we recognized $21 5 million in revenue. This compares to $39 million in 2019. The decline is primarily due to the COVID-19 impact on our business.
Gross profit decreased to $9 5 million as compared to $19 5 million in the prior year.
Gross margin decreased to 44, 4% of revenues from 51% this.
This year over year decrease in gross margin is primarily due to product mix and the impact that lower revenues have had on fixed cost coverage of cost of goods sold.
Total operating expenses for the year were approximately $12 6 million.
This represents a nearly $3 $8 million decrease from 2019, specifically G&A expenses for the full year decreased 21% R&D expense decreased 33% and depreciation and amortization decreased 32 per cent compared to the prior year.
Total other income during the year was 421000 compared to 403000 last year.
The majority is attributable to gains related to fixed asset sales as well as interest income.
Net loss for the year was approximately $2 2 million or five cents per share.
This compares to net income of 2 million or <unk> <unk> per diluted share last year cash flow from operations for the full year was 264000, and our cash and other investments totaled $17 6 million compared to $18 6 million at the end of 2019.
We had no borrowings or other debt on the balance sheet at year end.
Capital expenditures for the year were $1 5 million.
Our inventory balance at the end of the year was $8 4 million down from approximately $9 6 million at the end of 2019, we believe our current inventory levels, which are mostly finished goods remains sufficient to address our customers' orders in the near term.
As I mentioned previously 2020 had many difficulties and it is likely 2021, we will continue to be a challenging environment for profile here as we wait to see how the policies of the new administration play out and as vaccines and the Corona virus impacts evolve in the coming quarters of.
Although we expect the second half of the year to be better for the company, we could see ups and downs throughout the year as it relates to our quarterly results.
I will now turn the call over to Cam to provide an overview of our business counting.
Thank you Brian over the last few months each of US has heard and expressed the desire for 2020 to just end of.
Although our profile teen customers are and our industry at large share. This overall sentiment we have made great progress for when the effects of the pandemic diminish.
We are fully aware that many challenges of 2020 will continue throughout 2021, however, due to the strategic actions that we implemented we look forward with optimism.
In the fourth quarter of 2020, the weekly average rig count for North America increased to 380 for from the third quarter average of 287.
This is far below 2019 fourth quarter average of 933.
We are encouraged that the rig count has risen steadily since mid year.
So we are seeing this increase in rig count as Ryan mentioned, our customers remain firm and maintaining capital discipline programs and strategies.
As stated by numerous E&P executive management teams 2021 will likely be a year for U S shale production remains flat or potentially decreases despite strong consensus that commodity prices will rise.
Though drilling and completions are expected to be limited and not likely at levels experienced pre pandemic profile of products solutions and services have and will continue to experience demand on new and existing infrastructure.
Our product and support reputation coupled with proven performance safety and reliability is what keeps us as the market leader in this space.
In 2020, we sold our products and solutions to 127 new customers.
These customers included producers downstream transmission and utility providers resellers Oems as well as opportunities found in markets outside of our traditional legacy business. This is a validation of our sales strategy product reputation and the tenacity of our team to find opportunities. Despite the challenge.
As presented in 2020.
The P. F. 'twenty 200 continues to impress new and existing customers.
Though our ability to showcase and interact with customers has been impacted we are pleased with the traction and adoption rates we are experiencing our.
Our ability to successfully launched this product can be attributed to the brand confidence we have achieved in our industry.
The impacts of COVID-19 slowed our progress internationally. However, we continue to support our distributor network as the endeavor to bring our technology and burner management solutions to their individual markets.
As mentioned on our third quarter call. The P. F. 'twenty 200 was installed in multiple countries and we were able to receive repeat orders in the fourth quarter.
The P. F 3100 product line has been vital in our growth and diversification strategy within the upstream and midstream space the <unk>.
Significant number of projects completed since its launch would not have been possible with our legacy BMS technology.
This is primarily due to the application complexity and requirements, including multiple pilots and nor burners force draft certifications and input output quantity and concentration.
More than half of these projects have been installed on applications beyond the typical heaters, which are legacy systems have traditionally controlled.
These applications include higher spec incineration equipment, frac water heaters, and multi burner process heaters to name a few.
These P F 3100 projects demonstrate methodical progress and validation of our strategy to support broader applications within the oil and gas sector as well as enter alternative industries. The strategy will continue to unfold as we bring on strategic channel partners, who have a footprint in combustion and.
Process applications, both within and outside of oil and gas.
As previously discussed the need and use of combustion control and management technology exists in a vast array of industries beyond oil and gas markets.
Our strategy of envision continue to include a focus on expansion into these growth segment markets. In 2020, we were able to complete installations in several markets, including agriculture aviation renewables construction and infrastructure.
We plan and expect to see a broader range of industries served by our product.
As our brand awareness expands and as we bring on channel partners, who focus on these markets.
We are excited to share that in 2020, we partnered with a leading innovator of clean energy solutions to support of project focused on onsite hydrogen production used by hydrogen fueled vehicles.
R. P. F 3100 solution was installed on the test unit as part of the methane reforming process preliminary proof of concept has been validated and our technology is a strong fit for their product.
In the fourth quarter, we engaged in discussions to support of major renewable fuel producer and upgrading of critical thermal appliance. This opportunity represents a potential new market for investigation.
Pro fire had the opportunity to provide of specialized OEM with the burner management system requirements for a heater used by heavy and light industrial manufacturer.
The supply is a critical component in the manufacturing process of products used in aerospace power generation and industrial and chemical processing industries.
We continue to pursue opportunities to expand our product offering to our existing customers of markets. These opportunities include engaging with potential partners organizations, who have innovative technologies that solve the need for a pain point for our customers.
We are exploring emissions monitoring and reduction optimizing operations through machine learning and artificial intelligence and improving overall site safety and security.
Profile remains in a solid position with our balance sheet, and Brad and reputation to potentially participate in M&A activity.
We continue to conduct the ongoing due diligence on potential acquisition prospects.
We maintain our focus to grow our existing burner management related market share with our core legacy solutions into upstream and midstream markets as well as the downstream distribution pipeline and transmission segments.
As previously discussed we are also assessing strategic partnerships, which support our product offerings as well as partnerships with companies who operate in have combustion experience and presence in broader markets.
Despite our reduced revenue and spending levels, we remained committed to our sales strategy for our core business.
Although we have had to adjust our sales tactics to accommodate social distancing guidelines most of our sales operations remain unchanged.
Having highly trained sales service and technical support associates available to quickly address customer needs of both virtually and in the field remains a competitive advantage for us.
Before we turn to questions Ryan and I would like to once again, thank our employees for their continued dedication and sacrifices. They have made for the ongoing success of the company of.
Operator would you please provide the appropriate instructions. So we can get the Q&A started.
Sure and at this time, we'll be conducting a question and answer session. If you would.
I'd like to ask the question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue.
You may price start to if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
And our first question.
Is from Rob Brown with Lake Street Capital markets. Please proceed with your question.
Yeah.
Good afternoon.
<unk>.
The first question is on the you talked about some of the new market opportunities Youre working on in partnerships and M&A of it.
What markets are sort of the most interesting is it really of mission mission.
Michigan monitoring and and how much is this M&A driven and how much can you do with your existing product lines.
Kevin do you want to take that one.
Sure Yeah, Rob good to hear from you as always.
Within our space, obviously, we want to look to our existing customers to find more things to sell to them because we have the sales channels built yes. The emissions monitoring is interesting can we build that internally.
I'm sure we could but we are for the most part looking to partner with.
With the industry players for already out there and looking for really just that support channel to get the their products to market. So we've we've begun conversations with many customers just trying to understand what their roadmap looks like for that artificial intelligence emissions monitoring we know that regulation of 7%.
Colorado is a big driver behind this and we believe that that similar type of regulations will carry forward throughout the United States, We're already seeing it in Canada as well. So that's that's one way to tackle it.
We do have technology that we think eventually profile could do.
Do some artificial intelligence with our own but that hasn't really started as of yet again.
Again still early in the research stage for that but really looking to customers to drive what theyre going to need to be able to operate in the future of less people on the pad being smarter with our remote management and managing by exception of instead of just always rolling trucks.
Okay, great. Thank you and the and then in terms of the demand environment. It sounds like things picked up some in Q4 and you had a pretty good quarter.
The sort of what you were thinking of Q3.
And how does the demand environment look and I guess when do you sort.
I feel like you have visibility the things have sort of stabilized.
That's a great question I'll make a couple of comments and then I can let cam add to that as well, but overall we did.
C. A good quarter of great quarter, as you've seen for Q4, and we were a bit surprised.
We certainly saw an acceleration there and some of that was the buildup of.
Deferred demand and deferred the capex spending in 2020, and and maybe some of it was getting a good jump on 2021 as well, but we.
We certainly think that.
With what we've seen from the vaccine and the decline in Covid statistics throughout Q1, thus far.
<unk> is being projected in the next couple of months that that demand from a consumer perspective, we will continue to increase and we will certainly see that that has driven up oil prices and we think it will probably continue to do that it will likely drive up prices at the pump as well.
But we don't necessarily see the oil producers reacting and just taking the excess cash that they are likely to generate from these higher prices.
The investing it in drilling activity and bringing on new wells, they've been very firm with their commitments to.
Maintained production levels.
Certainly they will have to bring on new wells and complete some of the existing wells that are out there, but it's not likely we're going to see that demand shift back to where it was last time we saw.
Prices at this level and we do think it'll be a measured effort. There. So yes demand will go up and we think we'll benefit from that but it's not likely to go back to where it was a couple of years ago cash.
Cam do you want to add anything to that.
I think you hit it well, obviously COVID-19 last year a lot of projects were deferred and it was you know if it's not broken don't fix it aside from the drills and completions being down significantly, but if we look to.
Kind of 2021 of the fundamentals of our setup for for gasoline. It's the most bullish it's been for nearly a decade stockpiles are at 10 years lows.
However, we need to consider that that strength is.
Is is really heavily reliant on supply and not completely demand yet, although we do expect to see summer demand kick.
Kick up, but again of 28% or I think it was up to 30% of gasoline usage in the United States is on commuting to and from work and we don't know what that quite looks like yet.
So a lot less remains to be seen of what the what the man will look like here in the 2021.
Okay, great. Thank you for all of the color.
I'll turn it over.
Thanks, Rob.
And our next question is from John White with Roth Capital. Please proceed with your question.
Hey, John good.
Yeah, Hey, guys. Good day, good to hear you hear from your end are really good to see the night the.
Fourth quarter always wanted to see you guys do well.
In terms of geography or basin.
For your sales to exploration and production companies in the fourth quarter was was there one region. The dominated or can you can you give us some color on how the sales to E&P companies was spread out.
Yes, certainly of Great question, and we have certainly seen some interesting shifts in geography and regions in place throughout 2020, but I'll, let Ken speak more specifically to what we've seen there.
You bet, Hey, Jon we actually had a very strong northeast in the fourth quarter a lot of service revenue.
That's that's normally traditionally one of our stable areas. So that's the Marcellus and Utica.
We also had a very strong fourth quarter in Canada, driven mainly by service and we saw a lot of deferred maintenance deferred retrofits all pile into the fourth quarter of pushed to the fourth quarter because of the cold weather is coming but as always we were strong not as strong as we'd love to be in the D. J basin.
For the Bakken was quiet and we expect that to be going forward trend at least here for a little while but the south Texas also had a little of nice jump in the fourth quarter. So.
It wasn't driven mainly by one area and in total, but really our strongest two areas probably in the fourth quarter, where the north Eastern Canada.
Okay, well that makes sense on the Marcellus and Utica.
Gas prices weren't hit as hard as crude prices are in 2020, so alright, well thanks for that the detail and the natural results again.
Thanks, Sean.
Okay.
Our next question is from Samir Patel with <unk> capital. Please proceed with your question.
Hey, guys congrats on a good quarter.
Thanks, Thanks for that.
Yes, So cam I guess my first question I was really interested in what you mentioned about the hydrogen fuel cell kind of project in the renewable alternative fuels project I mean, obviously during the past year of plug power fuel cell energy that's been the area, where the market has been very very excited.
So I you know kind of kind of a departure from your traditional markets. If you could just talk about what opportunities you see in that kind of emerging clean technology space.
Yeah absolutely.
The fire of controls have the.
The strong the ability to be used in a lot of those processes combustion when done correctly is actually very clean and profile of being a combustion experts with the experience. We have the ability if we can find them and as we find them to support a lot of these projects. So for example on the the project that we mentioned with the.
The hydrogen onsite producer of.
Basically profilers role and that is one of the critical steps of making hydrogen is to you you got of heat. It up you got to heat up of furnace. The furnace portion of the what's called the SME for the steam methane reformer. So pro fires not controlling this whole skin, but we're doing an important part of it which.
You know again for progress.
Hydrogen company, but profile can do combustion and a variety of wide variety of industries.
The alternative fuel.
Provider that was the neat project for pro fire, we hope that we'll be able to execute at a share of this year, but we jumped into meaningful.
Connections with the that large.
Manufacturer of these fuels and it looks like it could be of great opportunity. There's a quite of few of these plants across the United States and Canada and it opens up an existing or of new sales channel potentially where we can go in and.
See if we can't capitalize there so if you've got gas and you're burning it which we've said before the wellhead at the wells on the pad less than 6% of the natural gas or gas used our burn is at that place. So there's a lot of other places to go.
Again, we've talked about it for a couple of years. We look we investigate and we are we are looking we are investing in the last couple of years here, we've really made some strong gains.
Strides into.
Getting our name out there, but still we as we mentioned in the the script and in the on the on the call here.
We're going to need help in those areas because we don't have the salespeople with the connections to all of those industries and so we will continue to look for partners, who can help us get into those places.
Okay that makes Steven go ahead, just emphasize as well there I mean, you you said this is opening.
Areas up for us in that market, but at the same time.
This customer is in the early stages with their product offering and we fully anticipate and expect that this wasn't just the onetime project, but that they will be of repeat buyer.
And.
To provide business for us in that regard as well.
Yes, that's interesting.
The second question was on margin I think last spring you talked about of 7 million breakeven level and I think you've more or less broke even this quarter at a much lower revenue level. So I was trying to understand out of the cost cuts you've done a lot of companies are talking about you know some of it being permanent some of that kind of coming back online as the world goes back to normal you know some of the travel and things like that.
So maybe just help me understand if your revenue is kind of start to ramp over the next couple of quarters. How you think about that dropping to EBITDA or net income or however, you think about that.
Yes, certainly a great question there scenarios of it.
A lot of what we did in 2020, we designed to be temporary and in some regards we did have a significant reduction in head count and we're not immediately going to just ramp that back up in 2021. However, we did do furloughs that reduced wages and also hours worked by them.
<unk>, which was the fifth for the opportunity and the demand at the time.
Some of those have been unwound and so we'll see some increases there we did get.
<unk> assistance from the Canadian government for our Canadian workforce throughout 2020.
That has some of that has been extended into 2021 sort of benefits there but is that unwind.
There'll be a little bit of additional cost as well we cut out.
Primarily all travel in 2021, and and we anticipate that travel will resume in 2000, sorry, we cut it out in 2020 and that we anticipate that that will start to resume in 2021.
So some of those costs will be built back in and even on the head count reduction side.
Asked a lot of our people in the last nine months and year.
To cover a lot of areas and as we ramp back up there are certain holes that are more critical than we will need to fill those as well so.
We intentionally designed a lot of that to be temporary to kind of get us through that crisis, and we anticipate that we will have to rebuild some of that so obviously increase revenues will need to help offset those costs.
To maintain the breakeven and even get to profitability and increased profitability.
Throughout 2021, so as you clearly said, we we broke even at a much lower level than what we were talking about a year ago.
Where we were at a year ago, but that will start to increase somewhat in 2021, we're not planning to go crazy at this point and ramp up costs significantly, but we will certainly have to reinvest in our business to rebound and support customer demand as that recovers this year.
That makes sense and can you keep talking about.
The capital discipline and I wanted to understand I know I've asked you. This question before how much activity is needed to maintain production kind of given that the decline treadmill of tail right. So what do we think about it in terms of rig count Frac spreads completions.
How much activity do you think you know your customer.
<unk> will need to do in 2021, and how does that compare to kind of the levels seen in Q4, I mean, we've continued to see the rig count Ryzen I think you talked about forecast. It seems like a lot of people are expecting it to get to the five 600 by the end of the year.
So I'm trying to just understand how that translates to deal of revenues.
Yeah. It's a good question, we really want you to figure out the magic formula on that.
No doubt there is no doubt.
As we see stockpiles and Theres rooming rumors that Cushing could be nearly depleted this year I don't see that happening, but I'm not an economist so much smarter people are going to figure that out of the mi but right now in my opinion. Our opinion there is no way that this level of drilling in north.
Erica can sustain if demand picks up we're going to have to see.
The increase in drilling to keep up now a lot will depend on what does the.
The Prince Abdul Aziz Ben Solomon do we all had a collective.
Exhale, when he announced that they were gonna.
Not the increased production in April of <unk>.
The some of the modest increase the Russia, and Kazakhstan, but we really still don't know we know that OPEC believes that the whole mantra of drill baby drill in U S. Shale has gone they believe that's gone forever and the there.
Might be right.
But still this is going to have to come from somewhere and the U S. Shale, we know can pick up quickly, but again that capital discipline at least from the majors, we believe that theyre going to stand very firm and their drilling programs, which are very hush hush for the year, but we do see some of these independents and smaller.
Our smaller producers, they're kind of they're going to push and so there'll be a there'll be a target for profile. So what is that level. It's more than it is today to keep up with demand, we believe but how fast they'll come on and we could we could end up with from.
I'm really high prices this year, because there could be of a shortage.
We'll have we'll have to see.
Alright, Thanks, I'll go back in the queue and I'll come back if there's no other questions.
Thanks Amir.
And as a reminder, again if you have any questions you May press star one on your telephone keypad doing sort of ensuring that you join the question queue.
Our next question is from Jim Mccleary with Bradley Woods. Please proceed with your question.
Hey, Jim Thank you.
Yes.
I think you addressed this a little bit in the last question Ryan but.
But for the before the Covid hit.
You guys were talking about accelerating expenses I think primarily for the 3100.
Wondering.
When you'll revisit that or if you.
If you completely changed your mind about how do we of course that market. If you can just.
Scott.
I appreciate it.
Yes, certainly.
We did have a number of plans before COVID-19 hit that.
<unk> got deferred and reversed and changed.
We certainly are looking at that currently with our overall R&D investment approach and with the things that we've accomplished in 2020 and the things that we've learned there where we need to reinvest and that's in very active and ongoing discussion that we're having and we're looking at how quickly can we reinvest in what are the cost of each.
Two of those projects. We believe the 3100 is an area, where we will continue to invest in additional features and capabilities.
Just on feedback that we've gotten from customers in the projects that <unk> talked about in his prepared remarks.
We've seen a lot of great things that have come to the company from the development of that 3100 and the projects that we've done with it.
You had shifted or deferred a little bit of that investment in the 3100, and we we're focusing heavily on the 'twenty 200.
That has also gone really well.
The original plans were that we would have seen a much greater shift from 'twenty $102 2200 in 2020.
But for obvious reasons that was slowed in deferred and so we anticipate more of that shift happening.
This year in 2021, but we will continue to invest in that product as well. We are looking at shifting of sizeable portion of our R&D investment away from just existing product lines. Like these two I've mentioned and focusing more on additional product lines like Cam has mentioned as well with <unk>.
<unk> monitoring and.
The clean technologies other opportunities in those spaces. So we certainly are having all of those discussions were continuing to invest.
In my remarks, and even in the financial results you would have seen that there were some significant sorry a.
<unk> decreases in R&D spend in the in the periods that we were presenting.
Most of that I will say was it related to.
Just the timing of how those projects flow through our investment in certification process in <unk>.
2019, we spent a lot of money getting the certifications in place for the 2200.
And in 2020 of those were already in place. So we didn't have to spend that money. So that's where a lot of the decrease happened. There I think we did have a couple of of head count.
Reductions.
As part of the R&D team, but largely that team is intact and is fully focused on these areas of investment in trying to help drive profile of <unk> future.
Alright, that's it for me Thanks, a lot guys.
Okay.
Alright, Thanks, Jim.
Our next question is from Deane Friday of private Investor. Please proceed with your other question.
Hey, guys. Thanks for taking my question.
I guess.
Looking from a high level as the Canadian Lucky.
Felt of the border how of your customers responded to the change of administration.
Any specific behavior, you can call out would be appreciated.
Yes, Kevin do you want to speak to that from the customer perspective.
Sure. So dean do you are.
You want to know the the Canadian take on it in the or the U S or both.
I guess I guess, both but more interested in the U S side, yeah. It makes sense so right now we.
And the Bank of America Global Energy Conference every year.
And that's always held in November so that was right around election time, and everything is getting really exciting in the United States and.
From what we heard from management teams across producers.
They understand what's going to happen. The understand also that the states are going to have a lot to say about how things will go in and how things are funded so many things are funded by this industry and so yeah, you might say well when we're not gonna Frac, we're not going to drill which I'm not saying that's the policy, it's not but.
The state needs to pay for education states need to pay for a lot of different things that are funded through that so.
Our customers, yes, the theyre concerned what will happen however, they've been preparing for this really for a couple of years and that that is where we're getting meetings to talk about things like what are we going to do about emissions. How are we going to you know what will come out from this administration. So we tried to get ahead of that well there.
It would be a shift from flaring no doubt there will be customers have already been preparing for that which is and opportunity for profile of as quad O regulations become again more interesting to our our customers and they put can busters out which profile has technology that works.
Perfectly with that application.
So.
Yeah the.
We heard about the potential or the drilling ban fracking ban on public lands that represents a very small percentage for most of the majors of the lands that they had we are we are seeing across the board, though our gobble up of land and a little bit of increased drilling.
However, completions are lagging a bit because until the production isn't needed or if the price goes up they're all hedging that it seems we won't see that so is there a fear I wouldn't say, so I think they're ready for it the they're ready they understand that it was going to come regardless of who got in there there had to be change and the.
They're just looking to see well how can we be.
Profitable in this new space and the new restrictions that may or may not come in.
And Cam I'll, just add to that as well that.
A lot of the administration's efforts and attacks are on <unk>.
Federal lands with drilling new leases and pipelines and so forth. So.
I think it has a greater effect on some of the pipelines for sure but with the new leases. The E&ps right now have so many existing leases that they can't even really keep up with what's there. So we don't really see that as having an immediate impact it's probably two or three years down the road as far as.
When that really starts to take effect, obviously things can change in the administration could do some things that may surprise us or try to impact existing leases that are in place as well but.
Even though there is a lot of talk about it it doesn't seem to that it's going to have an immediate impact but may be more of that longer term and the two to four year horizon.
Okay. That's that's.
That's really helpful.
When you look into the later half of 2021 is there are you guys expecting to be able to do a little bit more of of international travel maybe to support some of that what was the.
Geographies, where you don't have the big presence.
That's the do you want to speak about the international effort.
Yeah, you bet, we still are obviously limited to our ability to travel there because you come home and depending on where you reside you're going to have to move into a hotel for a few days in and paid really high prices.
But.
Really a lot is going to be I think told as countries rollout there vaccination of plants and how successful they are in and again all of the rumors and conspiracy is out there of what that will be I don't know, we hope to be able to by Q3 would be probably pretty early but by Q4, we hope to be able to do it.
But again the team is really doing the best they can with really wonderful technology that has shown us of different way that we all can agree. We we appreciate of times and they're sick of at other times, but for the most part of it we would hope to be able to get out there again soon but we're always looking at that international channel of.
How can we expand it how can we get it to be stronger.
And some of it will require face to face visits. So we hope for Q3 end of Q3 Q4, but I think of what remains to be seen on that still.
Okay. Thanks, guys.
Thanks Gene.
Our next question is from John bandwidth of ascend wealth Advisors. Please proceed with your question.
Thank you good afternoon, Ryan Cameron how are you.
We're doing well, but the good.
Couple of questions.
Wondering if you've seen any new interest in your product offerings as a result of the recent the deep freeze and.
In the Gulf Coast, Texas, and so forth and have you had any new.
<unk> customers inquire about some of your products as a result of that.
We certainly have had some interesting feedback from some of our customers and Cam I'll, let you speak to that.
Yeah, we yeah. It was it was one of those things.
The profile. Unfortunately upgrade all of the piping in People's homes, which caused a lot of damage. Unfortunately to even team members within the profile of the team.
Just the infrastructures of not built to handle it there are one of the the great things will share is we got a phone call from one of our larger customers, who has a big midstream company and in the United States, saying, we want to thank profile for.
Having or your technology on all of our heaters not one of them went down.
That was the that is always kind of been our claim is give us your critical heaters. That's what we want we want all of them, but give us the critical heaters and we can show you. What you can what we can do so that was a really nice feather in our cap in terms of will this change will this add to customers needing to have pro.
For our technology there.
There is definitely a chance and opportunity that the utility backbone will need to look at adding more heaters to to deal with pressure drops there is definitely your power generation your.
The they have heaters, that's one of the natural gas that are used in the turbines to generate electricity.
That could spark some demand some backup redundancy some upgrading for sure.
Until the companies across the United the while the southern parts of Texas. They don't run line heaters, so much for pressure drops and things like that so could they in the future potentially we don't see this as a monstrous initiative that will come from this but we do think utility companies will again be investigating broader of what they need.
To do even if you go to the north well what would they do if things got really hot.
Hot.
Again, how does the profile helped there while it's already hot we can't really help them, but it will spark debate conversation and discussion about how we're going to protect the grid.
So.
Not huge to start but definitely of interest.
That's a quite quite a testimonial from that.
The client of yours and.
Yes, the leverage that.
We can.
For the heaters on all of those wind towers right.
Right I don't know if that.
Yeah, I don't know if all of its possible but.
My other.
And it kind of.
It goes back to some of this efforts in the renewables and I'm. Just wondering you know a lot of the majors are.
The focused or increasingly focused I guess on transitioning into greenfields renewables and so forth. So I was wondering if if.
Youre looking at.
That is trying to partner up or get involved in some of the.
Some of their efforts.
Yeah.
Well.
Bryan you can jump in after if you like.
This is one of those things the profile is actually over the last six seven months tried to implement an innovation program within profile of where we will work with producers or customers new markets too.
See what this looks like to see how we can help is there ways to partner is there of technology to build the problem to solve.
So yes, it's very interesting the profile of course, you've got companies that.
Say, they're they're they're all in on this we worked with the utility company that says our hydrogen roadmap is xyz, then we get to a meeting with them and we end up talking to them. Their hydrogen program consists of one person.
The industry has a long ways to go there are some companies Oxy for example, their CEO. She she is fully announced they are going.
Hard after this and and there are some that are putting some mega dollars behind it. So do we want to be part of this yeah, we want to but it's it's tough getting into those doors and getting those conversations when you might not potentially you have the product yet we want to be looked at as an innovation partner for.
Of these companies, but we of course can't be everything to everybody.
Alright, thank you.
Yeah.
I'll just add to that Cam I think you covered it really well, obviously theres a big shift within the industry and even outside of the industry for renewables and what that will mean over the next 510 15 20 plus years.
And we certainly see that we see that that is an opportunity for profile of <unk> as well just like Cam highlighted with some of the projects that we've done there is a place even with our existing technology to contribute and to fit into those efforts.
And as Ken mentioned, we're investing in other areas, where we can come up with new technologies are better fits or additional fit as well, but in saying that by no means do we believe that there is an end right now to our efforts within oil and gas. We think there's still a long runway for oil and gas and we can can.
To help companies the.
The cleaner safer better producers as they.
Look to extract fossil fuels as well.
Yeah I was I was thinking you mentioned the oxy I was thinking of companies such as <unk> in total and B P who of you know kind of been on the forefront of this uneven exxon's now.
And on Board I guess.
Maybe being forced to but.
So it just seems to me that there's the there's any.
Increased.
Interest in in that end.
How you fit into it or work your way into it.
Not sure, but just was curious if that was you know what.
T J idea on your part.
Yeah.
Yes, it definitely is.
Very good well, thank you and good luck.
Yeah.
Thank you John Thanks, John.
Thank you.
Yeah.
And once again, if you have a question you May press star one on your telephone keypad. Our next question is from Samir per ton from <unk> capital. Please proceed with your question.
I just wanted to follow up on sort of the scope of the M&A program. So I mean, the acquisitions, you've done maybe two or three of them over time, they've historically been kind of the small pay a couple of million dollars for really of product line youre not really buying cash flow is there I mean, you're buying some revenues, but it's more of that youre just buying some products you could pick through distribution channel.
So it sounds like that was sort of you're trying to do again, but I was just curious if any of the opportunities you're looking at are actually bigger kind of.
More of more sizable relative to your cash balance. So just if you could if you could just provide a little more detail on kind of how you were thinking through the M&A pipeline.
Yes.
It's a good question and it's a challenge there are a number of opportunities that are as you said similar to what we've done in the past kind of smaller dollar values.
And there is the number of opportunities that are significantly expensive, especially in the renewable space right now where.
You mentioned plug power that obviously, the the prices for those public companies and entities in that space of gone up tenfold in the last six months. So there certainly is a mix of those things and obviously, we great power of small Microcap company. So we can take on of plug power or something of.
That nature, but there is a mix of what we're looking at and evaluating and trying to determine where is the right play for profile or is it a smaller tuck in.
The.
Allows us to build into that space over time or is it a larger.
The 10 to $15 million to $20 million range that speeds up that process. So we certainly are looking across the board. There is a lot of activity there and a lot of things going on and we're still trying to determine which of these are the right path or.
Of which ones will find in the coming months that might be the right path forward for pro fire Kim anything you want to add there.
I think you've tackled at well Ryan as you mentioned the tuck ins are nice if you can find them, but for the most part we really got the tuck ins we like.
Something might come up for sure. But then again you you also have to keep your eyes open for these potentially larger the larger opportunities that.
Perhaps you can pivot and diversify further so lots to consider it's no matter what we do with these are big things to chew off for profile of because obviously, our M&A team is.
Is it is the team.
So, but it is something of of high importance to us we are investigating and when we say that we're looking at opportunities as you know we truly are it's always under investigation of always looking always considering and analyzing what we should be doing.
That makes sense, but when you say that 10, 15 20 million it sounds like you're still taking your historical approach of not using debt and then b.
Not looking to issue a whole bunch of of equity and do some sort of transformative deal is that does that sort of a reasonable interpretation.
It's certainly part of the strategy, but at the same time, there could be opportunities that would require one or both of those as well and it all just depends.
So it's not off the table that we could do something bigger for sure.
Okay understood. Thank you.
Yes, no problem. Thanks Amir.
And there are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Okay.
Thanks, everyone for joining us on our call today to discuss our fourth quarter and full year 2020 results. We would like to thank all of you for your continued support as always we're available for any discussions or questions. You may have.
We will be participating in the Roth capital Partners Virtual conference next week and look forward to talking to many of you there.
Thanks, again and have a great day.
And this concludes today's conference you may disconnect. Your phone lines at this time, thank you and have a great day.
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