Q2 2021 Profire Energy Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss profile Energy's second quarter 2021 ended June 30th 2021.
Joining us today is the co CEO and CFO of profile energy, Ryan, albeit and co CEO Cameron Tidball.
Before we begin today's call I would like to take a moment to read the company's safe Harbor statements 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 company's expected growth increase in operating.
Expenses diversifying revenue streams expansion in new markets product development, the availability of company resources to make beneficial investments in 2021, and beyond and future demand profile products due to improving market conditions.
All such forward looking statements are subject to uncertainty and changes in circumstances forward looking statements are not guarantees of future results or performance and involve risk assumptions and uncertainties that could cause actual events or results to differ materially from the events or results described in or.
Painted by the forward looking statements.
Factors that could materially affect such forward looking statements include certain economic business public market and 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.
As required by law reader.
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 August 19th 2021, starting later this evening.
It will be accessible via the link provided in yesterday's press release as well as the company's website at Www Dot profile energy Dot com.
Following the remarks by Mr <unk>, albeit and Tidball, we will open the call to your questions as part of the question and answer session Messrs Oviatt and Tidball will be joined by profile Energy's Vice President of operations, Jay Fugal, and Vice President of product development patch.
Fisher.
Now I would like to turn the call over to the co CEO and CFO of profile energy Mr. Ryan Oviatt. Please go ahead.
Yeah.
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 Kim to discuss some highlights from the quarter and to comment on our strategic outlook and direction.
Yeah.
The second quarter of 2021 continued to show signs of recovery within the oil and gas market.
The loosening of restrictions related to the pandemic has led to the reopening of commercial and retail establishments as well as increased travel demand for both business and leisure.
As a result, the average price for a barrel of oil increased 14% during the quarter with current prices at a 3 year high.
This quarter represents the best revenue performance for the company over the last 5 quarters.
In recent days, some local and state governments are considering or have for re implemented masked mandates in response to higher reported COVID-19 cases, which could hinder the pace of the ongoing recovery.
Last month, the OPEC, plus ministers announced a $400000 barrel per day increase in production each month through the remainder of this year. This is largely in response to the improving demand for oil and gas and global progress on the Covid vaccine.
Despite the improving demand outlook. Many E&P companies are not expected to ramp up drilling and production activity in the near term given their capital budget constraints to remain within cash flows and a growing push from shareholders for other returns such as dividends and buybacks.
The average onshore rig count in the U S and Canada dropped 3% in the quarter to 508 rigs, but has since recovered to over 620 rigs in July.
The last time <unk> was in the mid Seventy's the rig count was 975.
We expect E&P operators to continue to focus their capex efforts on the maintenance of existing wells that was deferred over the past couple of years rather than.
Drilling new wells, despite these higher prices.
We expect that this trend will create future demand for profile and ultimately a stronger better capitalized customer base for us when drilling and production start to ramp.
With that let me turn to our financial results for the second quarter 2021.
Yesterday after the market closed we filed our 10-Q with the SEC and discussed the quarter's highlights in a press release.
As always both of those documents are available on the investors section of our website.
The transcript of this call will be posted in the coming days.
In the second quarter, we recognized $6 million in revenue, which represents a 19% increase from Q1, and a 38% improvement compared to the second quarter of 2020.
The sequential and year over year increases were reflected in both product and service revenue.
The improvements were achieved as a result of increasing demand for the industry and through the hard work of our sales and service teams to support customer needs and push our products into new areas of the midstream market and other industries.
Gross profit for the quarter was $2.7 million compared to $2.2 million in the first quarter and $2.1 million in the year ago quarter.
Gross margin was 44% of revenues of 130 basis point improvement from the prior quarter, but still below our historical range, which will likely continue until our revenues improved to more historic levels.
Total operating expenses for the second quarter were approximately $3.3 million.
This represents a $277000 increase sequentially as we unwound the furloughs that were implemented last year in response to the Covid related shutdown.
On a year over year basis operating expenses increased 92000, but remain significantly below our pre pandemic run rate.
We anticipate that we will continue to see modest increases in operating expenses through the second half of the year due.
Due to labor cost pressure and resumption of travel to support our business.
Specifically G&A expenses for the second quarter increased 1% year over year.
R&D expense increased 31% from the prior year quarter, and depreciation and amortization decreased 8% from the second quarter of 2020.
Net loss for the second quarter was approximately 397000 or <unk> <unk> per share. This.
This compares to net loss of approximately 602000 or $1 per share in the first quarter and.
And net loss of 809000 or <unk> <unk> per share in the second quarter of last year.
Cash flow from operations in the first half of 2021 was approximately $1.6 million compared to 847000 in the first 6 months of 2020.
Cash and liquid investments totaled $19.1 million compared to $17.6 million at the start of the year accounts receivable increased to $3.8 million due to strong sales in May and June.
Our inventory balance at the end of the quarter was $7.9 million down from $8.4 million at the end of 2020.
We believe our current inventory levels, which represent mostly finished goods remains sufficient to address our customer orders in the near term.
We continue to operate debt free.
I will now turn the call over to Cam to provide highlights from the quarter and an overview of our strategic outlook and direction Kim.
Thank you Ryan as Ryan mentioned, the overall petroleum sector continues to exhibit signs of a slow and steady recovery.
We are pleased with the progress made during the quarter in the industry as well as our reported results. However, we recognized that overall the sector remains depressed in terms of lack of investment from the financial community and negative publicity from political and media outlets.
We are pleased to see that during the second quarter of 2021 day.
Quarterly average rig count for North America was up 27% from the year ago quarter. As we've mentioned previously rig count and more importantly completed wells are critical to profile as legacy business as our products and solutions are utilized once the well is drilled completed and in production we are optimistic.
That we will continue to see moderate improvements.
For the industry through the second half of 2021.
We continued to develop relationships provide training and collaborate on potential projects with our strategic partners Spartan controls and <unk>, both of whom are Emerson impact partners.
<unk> has proven to be a valuable ally in the northeast in our core legacy business day.
We have demonstrated strength in marketing profile, it's complete solution packages to several end users.
We continue to be in the top quartile of customer revenue per profile.
Barton controls as mentioned previously has the potential to bring our products to a diverse range of industrial markets in Western Canada. We are encouraged by the internal investments they've made to support integration marketing and business development initiatives of profile products and solutions.
Turning to opportunities outside of our traditional upstream midstream and downstream utility markets. We've had a strong year, thus far in furthering our excellent brand reputation and product performance and what we referred to as the downstream side of midstream.
Our products and our team's proven project execution presents substantial value to our customers and we look forward to continuing our progress in this space of the industry.
We are mobilizing our sales team and marketing initiatives in order to support our continued pursuit of these projects, which are prevalent throughout locations, where we have sales and service assets in place.
During the quarter, we completed a large scale nearly $5 million project for a leading midstream energy infrastructure company.
Our project design support installation expert expertise and solution performance have afforded us the opportunity to participate in future opportunities with this customer as they have several plants that will that will require upgrades in the near future.
Additionally, we were able to complete pro fires first project specific to the petrochemical industry at a chemical plant during the quarter. Our burner management solution was selected and approved for use on a specialized appliance that day.
That is utilized both in chemical plants and in our refineries.
Our credibility and reference cases of similar projects, we've completed in midstream applications supported our ability to win this opportunity.
This project represented 1 of several projects completed in the quarter related to our strategic focus of revenue diversification into new markets outside of oil and gas.
In the quarter profile completed an appliance upgrade for a major municipality related to construction and infrastructure. We also provided our second complete incineration package for use in the mining industry.
Profile continues to engage in early stage discussions with significant industry participants on potential green energy opportunities that we believe will be necessary in helping to transform the energy industry in the coming years, we look forward to updating you as we progress on these initiatives.
We remain highly focused and encouraged by the traction received in new markets as part of our overall strategy to diversify our revenue streams. These efforts are starting to pay off and prove our value proposition in non oil and gas industries as evident from the business we are winning.
We continued to demonstrate suitability and a wide variety of burner and combustion management applications across North America. We expect this trend to continue.
We remain focused on supporting our channel partners driving organic growth and continued product development and enhancement.
Our strategy is enabled by our strong balance sheet and financial discipline, we continue to deploy investments in support of protecting and growing our core business diversifying our revenue streams, both within our legacy business as well as in new growth markets and in continuing to develop our exceptionally talented team before.
Sure, we turn the call over for questions, Ryan and I would like to thank our employees for their ongoing dedication and contributions towards the success of our customers our company and our shareholders.
Operator would you please provide the appropriate instructions. So we can get the Q&A started.
Absolutely at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star 2 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, 1 moment, please while we poll for questions.
Your first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Hey, Rob Hi, Brian Hi, Ken.
Just thanks for the overview of the projects that you were working on and maybe could you give us some color on the large project opportunity pipeline. You you named a number of customers who have a follow on facilities, what's sort of the kind of opportunity size of stuff that you're that you're kind of working on at the moment in terms of quoting or seeing in the pipeline over the net.
18 months.
Yes, great question.
Thanks for being on the call as always.
Yes. The project we completed in Q2, we were made aware of it.
In Q1, it's an existing customer that we deal with and kind of in some of our markets where they have other midstream applications, but this is 1 of their larger facilities and plans.
There are many many.
Energy infrastructure companies.
Under the terms of midstream that.
That have these bigger applications that we've done over the years, but not to the scale and size, where we did too.
<unk> thermal appliances, all in a very tight turnaround.
Profile, our team was really involved in executing that project in terms of what is on the outlook for the next 18 months. This customer has several plants that they're looking to upgrade and theyre not the only ones, especially in the areas of like the Permian Basin, Oklahoma, South, Texas, you have a lot of these <unk>.
Midstream gathering facilities straddle plants.
That have a lot.
We will call more complex applications multi burners multi pilots perfect for our 3100 per.
Product line, which we've been deploying over the really the last 3 years in these types of applications. We're starting to hit our stride, we're really executing on these projects well we've got a great reference case and these projects as we mentioned also in the.
In the call really dovetail in nicely in things like petrochemical plants as well as small batch refineries.
So in terms of dollar amounts what is the.
Total the Tam in this area, we don't have that for sure number.
It's kind of a moving target working on that but it is significant for profile and its right in our wheelhouse don't need to deploy different sales team than we already have service team is spectacular at this type of thing engineering team can support it and operations as well so.
Perfect and just again building out our reference case.
Okay, great. Thank you those stopes for good overview and then.
In terms of the demand trends as you get into you had a good quarter with how are you seeing the demand trends continuing kind of on a on a week to week basis as it is it still a low visibility or do you see sort of a trend line continuing to be strong here.
So Brian you want to tackle that 1 I can give some thoughts as well.
Yes, certainly.
It's pretty similar to what we historically have really all the way always seen in our legacy business that upstream midstream and downstream utility side of things. The visibility is typically a month, maybe 2 months at the most as far as products that are being ordered.
Even right now and you remember from years past the summer season tends to have a little bit of a downturn in activity, especially when it gets really hot in the southwest and Midwest.
West and so forth so.
We see a little bit of that happening now, but we are still seeing a healthy number of orders coming in.
But as I said, they're kind of more on that short term side of things, we do as <unk> indicated in the prepared remarks.
We do have a number of projects on the bigger side that are also that are also percolating and some of them are turning into sales orders others, we're still quoting and working with customers on but those do have a much longer horizon some of them more quoting out into 2022 and even into 2023 right now.
For some of those bigger projects, but we are excited about the number of those things that we are quoting on the number of the projects that our team is finding.
Some of the strategic hires that we've done recently.
Really.
Getting getting their feet wet and getting in and finding opportunities for us. So.
Although we'd love to see numbers much higher than they are right. Now we certainly are still seeing kind of a steady stream of things.
The COVID-19 situation.
So far throughout the summer and the improvements that have been seen have.
Been helping with that there is a lot of uncertainty as everyone knows right now related to the Delta variant and as schools are preparing to reopen within a month's time and then we start to get into that traditional cold and flu season here in North America.
There is uncertainty around that.
We're highly optimistic that the.
Adoption of the vaccine is going quite well and net things. This fall are going to be much better situation from COVID-19 than it was a year ago, but we will still see some uncertainty and who knows how that's going to play out over the next couple of months.
Okay. Thank you for the color I'll turn it over.
Thanks, Rob.
Your next question comes from the line of John White with Roth Capital. Please proceed with your question.
Good afternoon, John way.
Hey, good morning.
Good afternoon here good morning there.
Alright excellent results you beat me by a very very large margin congrats.
Congratulations.
Thank you.
<unk>.
And.
Cans review of the diversification effort sounds pretty optimistic.
Of the I know, you're working to expand within the oil and gas business.
In the midstream as he details and the downstream.
Outside of the oil and gas industry, what sectors are you most optimistic about penetrating.
Yeah, Great question.
We're tracking numerous industries, we're looking at everything from construction and infrastructure, which so far in the last 18 months, we've probably been overall the most successful at the most number of projects and as well as we're really finding that theres a GAAP.
Potentially for the niche expertise that profile has from a combustion perspective some of the feedback we got on some of the.
The plants that we've done upgrades for us.
We love the quote it's never worked better so so far construction infrastructure that things like your asphalt plants, you fly ash plans your sand driving widened drivers variety of those things where profile has done some great things, we're finding some value.
Being offered to the Oems, who operate in that space, where we're new to them for sure.
So far very very good traction there.
The biogas sphere, we've done a couple of projects here this year with several that are being quoted.
From incineration.
Applications in the mining industry as I did mentioned in the prepared remarks, but.
But we're seeing a push in that regard.
So it's a variety and then of course as we've talked about on this call and previous calls for the renewable space.
We think that there.
It will be a need for burner management, we know theres a need for burner management in that space as well as combustion expertise.
We're working with several major utilities on some of their projects on what they're looking to do to advance energy transition whatever it might be what they find is it's just not so easy to turn it on there's a lot of things you've got to consider and combustion and how you deal with that is 1 of those.
And it's a nice feather in our capex to be actually recognized as a partner that can come to the table with something to offer there. So that we really look forward to as we said in the call of keeping you in the loop on how that progresses, but we're very encouraged with where that is starting to so far.
Okay. Thanks, so much for the detail.
I'll pass it on thank you yeah no problem. Thanks, John.
Your next question comes from the line of James Jang with Universe Securities. Please proceed with your question.
Hey, guys How's it going.
Hey, great.
Great. So just a couple of questions here for me in terms of service.
How much of a mix do you see that going forward I mean, it looks like.
You know that could start to.
Ramp up for bid as we get to you guys servicing whats already out in the fields.
<unk>.
Can you kind of elaborate on what type of percentage increase you could expect to see as we move into next year.
Yeah, Great question I'll give some comment on that and Ryan for sure jump in.
We did have a very strong quarter in service for Q2 is approximately right.
Right around that kind of 10%.
That is about normal its not way above normal or is or way below its kind of just the average where we usually sit and we have done some.
Some worked so far this year or 2.
Potentially becomes service partners for companies that do things out of oil and gas that is still related into combustion that's very early stages.
Do I see it being a significant driver of revenue maybe.
Maybe not initially.
But a great place for our team to learn and develop in those spaces as well as to learn those industries, which we believe will turn into product sales exactly how pro fire got its roots, we started as a service company.
And where that what that brings us the opportunity to develop products find niches within those markets. So.
We don't see it as a massive uptick but we are very encouraged by that.
The capacity, we have and the actual percentage of that capacity, we're able to use for billable time.
Now with you mentioned all the products that are in the field yet our installed base is now over 75000.
If you look at some.
Some of the revenue trends, we've seen last year the year before and into this year preventative maintenance as a key component.
We also see an opportunity with a company that we acquired in 2019 that had a high efficiency burner. That's used in natural draft applications, we see a potential opportunity to get to our customers and give them quick wins on how they report there.
Overall cotwo footprint.
We have a compelling offer with that burner. So that's going to be something that would definitely hit our service revenue, but as well as our product revenue Ryan would you add anything to that.
Yes, I think you covered it really well that the thing I would add is we have made a small increase in our service team in Canada.
Pinned up.
Kind of a more northern Canada area that we didn't have a lot of service opportunity or people covering before so we have expanded a little bit there but.
But also in Q2 part of the increase in the service revenue, where the strength in the service revenue is attributable to the large projects that we were able to complete in the quarter.
Service is essential on these projects and doing the installation and getting it up and running.
Performing properly for our customers so.
As we continue to do those projects will continue to see the strength of the service team in service is absolutely critical and essential to how we run our business right now.
Excellent. Thank you.
Alright, and then for your products up for I guess.
Replacement at all.
Our 'twenty 100 is.
Unfortunately, although its long in the 2 still continues to perform very well.
But we are to the point now where we've we do have its its new version of it for 'twenty 200 were very creative in our in our product naming but it has been adopted nicely. We do have some customers talking to us already about what does replacement plans look like for the future.
We don't see customers, who have 1 or 2000 of these same replace them all tomorrow.
But you know funding things have happened before but we do think that there'll be customers that consider okay. What is the 5 year 8 year rollover plan look like.
But yeah, we've replaced that and then the third 1 hundreds kind of in the middle of its life.
It can continuing to be attitude with regards to feature enhancements.
Industry use.
So we've got a runway there for sure and we got it.
I mentioned, we have a healthy inventory of these things, which is really important right now given the.
The worlds.
A lack of supply of computer chips and things like that we're lucky to be in a place where we have inventory on our core products and that's just kudos to the strength of our operations and supply chain team for making sure that that happens.
So theres no jump in.
Sorry go ahead, I'll, just add I'll, just add to that that with the 'twenty 100.
It was built in a different manner than what were currently using for the 3100 in the 'twenty 200, whereas.
The ability to really upgrade that in the field or to extend its life cycle. Much further isn't really there, but the way that we've designed and built a 3100.2200 those capabilities are there so.
It is likely that those products may even have a longer life infield. If the customer continues to upgrade technology and add the new features and improvements.
That we're bringing to them so just keep that in mind as well.
Okay, great. Thanks for that so we certainly expect the large scale replacement cycle.
Then coming up which could help the top line.
Right.
Okay.
We would make sure that the large.
I don't know Ryan sorry.
I would say if you're talking in the next 5 to 10 year horizon.
Certainly that could happen as Kevin said, a lot of the 'twenty 1 hundreds that have gone out there theyre going out this year. They have gone out over the last couple of years, but so we would expect those to still have an 8 to 10 year lifecycle at least.
Those that went out.
7.810 years ago, those should or could start to be replaced over the next 5 years or so.
Gotcha Okay.
My next question is on <unk>.
On the overall industry. It seems like the bigger guys have announced that the.
Profitable instituting.
New dividend policies, but it doesn't seem like there's announcements on expanding capex.
No.
From your discussions with some of the smaller players or the non public players is that the same sentiment that there just kind of looking at profitability, maybe pay down some debt deleverage and not.
Spent too much on capex.
Yeah.
When you look at things like all indications point towards supply outpacing demand in Q2 or Q3 and Q4.
Which will lead to global inventories building, probably starting as early as September or October November. Obviously, this will mean commodity prices probably will go down a bit we talked about the delta. The variance are the virus and what impact impacts that could be however.
Most analysts are saying theyre seeing that production levels will continue to increase probably close to that 12 million barrels per day, which is still very modest 777% and 10% of where it is today, but your comment on your majors that are public companies, you're absolutely correct. There is no.
For pulling the trigger for increased capex into drilling they're sticking with their programs you are private energies. Some of your independence. They are focused on growth some of their plans through the second half of 'twenty, 1 and into 'twenty 'twenty 2.
We think they will.
They'll probably look to do.
Cash and if you can use that term and there might not be as hedged as some of your bigger groups and they'll also be looking to make themselves attractive from an acquisition perspective, but your public majors they'll continue to temper.
Production growth.
Because they're they're focused on some other things and that's its executive bonus driven for share some of it but it's also just world supply and demand and how they.
They realized that it costs them a lot more to for the most part get a barrel out of the ground versus a private.
Alright, great thanks for that.
And last question. This is just general thoughts on on.
For the channel on the new pricing for.
The Gulf.
Is it.
The Gulf oil pricing for the U S kind of break it out from <unk>.
Do you think thats going to make.
Anything pause and do you see any positives coming out of that for the industry.
Great question, Ryan do you have some thoughts on that 1.
I got to do some research on that yeah, I would have to say I need to research and I understand that better I don't know what implication will have.
Okay, how do you view that in Taiwan.
I I mean.
Yeah.
I think for the public markets I think it could be positive.
As you know in the U S is basically tied to <unk>, which is landmark Cushing.
Versus Brent, which is you have options. There you can ship it direct overseas you could store.
You know on tankers.
And pricing is as you know plan has always been higher.
I'm thinking if this does take take root.
Maybe for the public markets. It's another data point that you could point to where.
Pricing could be a little better incentive.
Improve a little bit.
Hmm interesting pay attention to that.
Alright, well thanks for the color guys ill jump off there. Thank you.
Alright, Thanks James.
Yeah.
Your next question comes from the line of Jim Mcgovern with Dawson James. Please proceed with your question.
Hello, Jim.
Hey, guys.
How's it going.
It's going well.
So if my math is right it looks like product gross margin in the quarter was flat with the prior quarter, even though revenue was up substantially.
Is there a mix issue or a pricing issue.
<unk>.
It took place.
Brian you want to tackle that.
Yes, I don't have that number specifically broken out in front of me, but.
I think youre probably accurate.
Certainly we don't believe there has been any significant pricing issues, we do have customers that try to challenge pricing, but.
We've demonstrated over the years that we can do a really good job of holding our prices steady in.
Maintaining those prices even in difficult environments.
We do have product mix that impact that every quarter either up or down.
Just the mix of products. It also with a little bit of a customer mix as well depending on who is buying in the quantities that they are buying we do have some customers that are at different levels of discount so.
The mixture of those types of things can come into play, but I don't have any further detail I can drill into at the moment on that.
Okay, Great that's helpful.
You both talked a lot about the move away.
Away from your legacy upstream business can can you put.
Either a percent of product sales or a range of product sales.
That came from.
No.
The non legacy upstream business.
For the <unk> part.
Yes for the most part we.
We lumped upstream and midstream together just because your producers.
In the United States for Drillers in Canada.
Their definition of midstream and upstream.
It's blurry so we have them together, we know that in the quarter, what we would call. The downstream side of midstream was very successful obviously with 1 marquee project you know nearly a half a million dollars.
But overall I think for the quarter I don't have it in front of me, but it was a.
It was a much higher percentage in those.
I guess not different but your true midstream guys that aren't drilling.
That they are truly gathering and doing some light processing.
For a lot of the operators it was higher but for the most part we kind of sit around that in the core business upstream midstream togethers around that 90% downstream transmission ranges anywhere depending on the time of year.
Potentially anywhere from 3 to 7 or 8% and international is still very small and then the remainder of that would be our efforts outside of oil and gas but.
In the quarter it was our strongest.
Combustion products and services sold outside of oil and gas that was our strongest quarter. So.
Since we started tracking which is the last.
The last 18 months here.
Right.
You see what I'm trying to get at is that this has been an initiative for the company for some time now and it's it's.
I don't know if this I think this is the first I recall, where you've been.
As specific about this many opportunities and this many.
Successes, so I'm just.
I'm trying to get.
Numbers Guy, so I'm trying to get our numbers flavor to it.
Yes, and that's the fun part is because you're <unk> to a degree sometimes limited by your ERP and how much manual work you want to do to track that type of business.
So it is something we could derive for sure and come up with.
But.
As we mentioned.
This was a strong quarter for that some of your bigger true midstream players did some nice projects and the pipeline looks very attractive and it is youre right. We've always been in that place, but we havent always been doing what we call again, the downstream side of midstream so maybe we.
We haven't really ever.
Chunk that out in our ERP, because it's really it's.
It's up to your interpretation of whoever is getting the sales, but yeah, I get what you're saying, Jim but we don't have the specific numbers broken down okay.
And I mean, you can tell from the numbers can gave that it is still a small portion of our business.
We're looking to grow it as much as we can as quickly as we can through the various actions that we're taking not only our internal organic efforts through our sales force, but with the strategic partnerships and so forth.
<unk> once once we get to where it's above 5% of total revenues, then we will be able to more meaningfully.
It out in our reporting and provide that therefore, you can assume right now it's less than 5%, but we certainly want to get quickly to that 5% and then grow it well beyond that our internal goals are that.
These growth segments become eventually just as large as our historical oil and gas business, but that's going to take time, obviously to get there.
Right understood.
And can you talk a little bit about the regulatory environment should I'm, particularly.
Right.
Interested in Colorado, and new Mexico, if theres been any impact.
For your business in those 2 states are or other ships.
Is it relevant.
From changing state and federal regulations.
It's a it's a moving target for sure, Colorado, obviously suppressed in it.
Part of it is just purely because of where our investments from E&ps have gone for the most part as we mentioned before there is no lack of available permits and <unk>.
Land that the majors have they're not really they haven't really been deterred some of it in new Mexico, yes, but the Permian basin really hasn't slowed down.
When you consider its percentage of production in the United States. So there's not really that what we're more seeing is what e&ps are looking to.
For the future of what what are emissions standards going to look like and what does that mean and how am I going to report mice cotwo footprint my methane.
Leaks. So those are some strategic areas for profile is working with customers working with some potential partnerships to see where does profile fit again, 1 of our our strategies as we'd like to get more revenue from existing customers. We have a great brand name, which affords us the ability to bring in potential new opportunities for them.
And so that's the regulation that we see probably more on the top of minds of drillers in exploration and production companies than that of potential drilling restrictions now of course, something that came out of left field, which has been discussed before stop all fracking well well that changes things.
But right now your majors have more than enough permits more than enough land to drill for.
Upwards of a decade without anything else changing.
Ryan did you have anything else from the regulatory front.
I might add some color.
No I think you covered it really well.
Does that answer your question, Jim or other thought it does.
No. That's that's perfect. Thanks, a lot I appreciate it.
Thanks for the answers good luck with everything.
Yeah. Thanks, Jim.
Your next question comes from the line of.
Sameer Patel with <unk> capital.
Please proceed with your question.
Hey, Sameer good day.
Samir do we have you you on mute.
Mary you on the line.
Yeah.
I wasn't fact on mute.
Can you hear me now.
Yes, we can hear you.
Gotcha, Okay, it's probably your best question effort.
Okay.
Yes.
Yes, so a couple of things you haven't touched on the first is any progress on the international front with travel opening back up and then the second is the M&A or use of use of cash on the balance sheet.
So anything you want to share on Los <unk>.
Sure I'll do international and Ryan and you want to take him in M&A. So international we have not seen anybody overseas as of yet your South America countries still remain.
To a degree you can you can go now non advised so we're being a little cautious with that however.
We still have the same group of distributors that we've been working with them. We are seeing some some more opportunities come in the door that haven't we were seeing more activity.
In Asia, the Mena region.
Revenue still remains kind of.
Close to historically, maybe a little bit better so far this year compared to last year, which you would expect.
It still remains a difficult market, it's difficult in terms of quantifying those areas and it's 1 other reasons, we really can't wait to get our people there to work closer with the distributors that we selected.
To ensure 1 that they are the right partners. It's always good to be able to do it face to face and see who you are who they are bringing you too.
So as of as of now again, it's not a massive investment for profile in terms of people, we don't have bricks and mortar but.
But we're tackling with our existing team and it's working well, we don't find its overburdening them and we think we're giving the right attention to it.
But.
It all alludes to though.
With the way that North American shale is changing someone's going to have to pick up the supply because not everyone's on an EV tomorrow or in a year or 5 years.
Someone's gonna have to pick up the supply for ever increasing demand.
And we're going to see that in places like Canada, we're going to see that in places internationally unless the U S changed its policy or your thoughts on the on the whole strategy. So Sameer I guess long way of saying, it's progressing of course, not as fast as we like but we think we're giving it proper attention. It's just a it's a slower process for.
Sure.
Yes, I think a question for Mike go ahead Ron.
Second question was on M&A and use of cash and even just before I get to that I'll, just reiterate ken's comments in that we are still being cautious as far as travel goes in the current environment.
Getting across borders either north or south of the United States is still challenging it's not impossible, but it's still challenging and we want to make sure people are protected.
We look forward to when that becomes much easier safer and better for us to do.
On the M&A and use of cash front, obviously, we've been able to kind of maintain and even grow our cash balance a little bit over the COVID-19 period of 2020 and even into 2021.
So we are looking at.
A number of things there, we've as we've mentioned as well, where we're making some small reinvestments in our business.
To prepare for growth opportunities and some of the strategies that we're working on so we're reinvesting a little bit more cash into R&D.
Starting up some projects are putting some more.
Power behind those projects via cash investment in people to move some things forward and Ken alluded to what some of those might be as far as helping customers with other ESG type initiatives very interested in that type of stuff.
We are still down significantly in our head count from where we were prior to Covid.
We don't have plans to simply just ramp back up to that same number, but we are making some strategic investments in.
In that regard, but now beyond that.
<unk> kind of pulled through these things the positive revenue growth that we've seen in Q2, and our anticipation that the second half of the year still continues to improve at a modest and slow but steady pace.
We are looking at other ways that we can utilize that cash we're still looking at a number of partnerships.
Ain't ventures potential investments with some of these companies that are developing some new products. Some interesting technology again to help a lot on the ESG front things that our customers are worried about.
There are some M&A potential opportunities that we're looking at that also could be a very good fit with current regulation and.
The push in in reducing emissions and things like that as well so still a lot that we're actively looking at pursuing talking about interested in.
There is nothing that we see at this moment is eminent in the short term, but those types of things can change very quickly.
We also are still considering the opportunity of what we've done a lot in the past would be buying some shares back we still think that the share price is quite attractive right now and that that might be something that we decided to do again going forward. So certainly a lot of different opportunities available for us and we.
We're very interested in using these opportunities to propel growth forward.
Sounds good thank you guys.
Thanks Amir.
As a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad as a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad 1 moment. Please while we poll for more questions.
Your next question comes from the line of John Bair with ascend wealth Advisors. Please proceed with your question.
Thank you Hey, Joe Good afternoon, how you all doing.
What are you doing it anyway.
Likewise, so a number of my questions have been addressed there, but kind of cycling back to a previous 1.
With a little different angle to it what's the percentage of exposure of your sales do you have going to.
Say, the private privately owned companies or smaller operators or private equity type.
Companies versus majors and.
Large.
It made independence.
In other words.
The narrative is that the majors.
Poke about and see this they're not looking at doing much in the way of.
Ramping up their rig count and so forth, but most of the activity is coming from the smaller players. So what's your what's your mix of your exposure in that.
Well, that's a great question, John I don't know if that we've quantified it before when we because in the core business. We were grateful and appreciate that we have such a high market share.
And I am not sure although your comment of the majority of the drilling it's still coming from your majors, it's just that your independents or smaller private they're actually in.
And percentage wise, adding more to their fleets of drilling them out of your bigger companies, but still the production the opportunity is still with the.
The larger producers because their drill program, even though they are smaller than normal are still there's still.
Trump the size of some of your smaller or your private companies. So overall, what is our exposure very difficult to say and I'll, let Brian comment on that but I think it's it's really difficult to say, but just because we have such a large market share of that.
Yes.
Yes, I can add just a little there again.
We don't have anything that's currently reported or tracked it is something that we could look at tracking going forward. It probably would require some good effort to do but if as cameras was talking if you look at what those smaller producers were doing historically.
A lot of them would probably fit into the categories of they had 1 to 5 active rig.
Going into 2018, or 2019, and it is likely that some of those companies have gone right back up to that level those same <unk>.
Numbers of rigs working in their areas, whereas the majors would have couple hundred rigs in some cases and they are nowhere near that so I think thats kind of the mix. There is that they've kind of gone back to historical levels, where the majors are still active and they are still doing more drilling than the smaller ones but.
And just a much reduced pace.
And I guess, however to add to that our customer base spans all of these different groups.
I don't have the numbers right in front of me, but I think in the quarter, we had around 350 or 400 different customers that were purchasing from US just in this last quarter and if we look back over a 12 month period, it was even a bit higher than that so with that.
Obviously, we're picking up a big number of those.
Companies, but again there the dollar amount of what they're spending and what they're ordering is much lower.
Then the major so very difficult to mix all that together, but I think we have really good exposure to them I think we still have very strong market share.
The companies that are purchasing burner management systems and solutions for their new products new drilling efforts.
Still getting the lion's share.
Well, okay. So so where I was kind of going he said to me.
<unk> are pretty much you know.
Holding their own if you will on the number of rigs that they're operating.
But as you just said you know smaller players dropped down from let's say 5 to 1 or whatever and now they're back up again, I guess what I'm.
What I'm trying to get at is is that enough of an incremental increase in <unk>.
If the increase in the rig count is coming.
Primarily from the non majors.
Then is it fair to assume that maybe your.
No.
These additional rigs that are being put on by the the smaller private operators or whatever.
Could translate into a pickup in overall.
Product sales for services for for you folks.
Well either way, whether it's the larger producers or the privates, if drill count goes up and completion follows in production follows profile stands to benefit regardless your majors.
There's 1 thing to say if it's.
A large Permian operator adds a bunch of wells on a mega pad and brings it all into a central facility that we already have upgraded.
Yeah, you're right, we don't get that whereas if a smaller private might be doing.
For us maybe not a mega pad, but a pad where theyre doing all their treating on path that could benefit profile absolutely it could.
But either way for the most part on average depending on geography of course for.
For the most part.
Drilling is going up in completions going up profile stands to gain.
Okay.
Another question is.
Regarding our R&D given the focus now on reducing emissions it well site in transportation and so forth.
Wondering if you were looking at.
Trying to develop monitoring devices that could.
So together with your burner management I don't know, if that's feasible or not but.
The burner management.
You know equipment on on site could you also piggyback some sort of a mission detector that kind of thing.
Working on that at all or sort of any of that.
Well darkening with another company that does that kind of thing yeah all of the above John.
Obviously, we're not going to give away all our secret sauce on the call here, but.
Yes, definitely things we've been looking at for for a while here our research and development team and then product development team.
Is looking at what our players in that space.
We.
1 thing, we do with our product development and our research and development was we look for traction we look to meet with customers and see if this is the idea is this what you need is this going to support and then is it just 1 customer or do you get traction.
Cross a bunch and then you get a prototype to get it out there.
For someone want to pay for it. So yes, absolutely operators are considering what is their play we've we've mentioned it before we're considering and working with.
Bringing potential solutions that will support leak detection and leak monitoring pinpointing that quantification.
It's being looked at through partnership we're doing some things internally as well to to consider well how can we support customers ESG initiatives, we know right now depending on the state most customers. They don't really breakout for example in our world.
They just kind of report each appliance that it would it be on 24, 7 well that's not the case.
And if we can help with efficiencies there and potentially with reporting of that we might be able to give them all a very quick wins so again.
Regulatory is really fun and it's never clear and it's sometimes left to interpretation most times and so we've kind of got a track all of those things watch all of those things investigate all of those things and to see if we can probably to really support them, but if it doesn't create value for them and they can't use it it's about <unk>.
<unk> for them, there's no point, we don't want to do a nice to have things we want to do must have things. So.
Long answer there, John but definitely all things that profile is looking and considering with our R&D and product development initiatives.
Yeah, well that emission control aspect of it is is gonna be a must have it's not a nice to have.
Not the way up not the way things are going so okay very good. Thank you for answering my questions and for the talk to you soon.
Excellent Thanks, John.
Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to hand, the call back to management for closing remarks.
Thanks, everyone for joining us on our call today to discuss our second quarter 2021 results, we'd like to thank all of you for your continued support as always we're available for any future discussions or additional questions.
We will be participating in several investor relations conferences in the coming months, including the 3 part advisors and virtual Midwest ideas Conference. Later this month the Lake Street virtual best ideas growth conference in September and the Dawson James in person small cap growth conference in October we.
Look forward to meeting with many of you at these upcoming events.
Event details are linked in the Investor Relations calendar on our website. Thank you and have a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you all for your participation.
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