Q3 2021 Profire Energy Inc Earnings Call
[music].
Good afternoon, everyone and thank you for participating in today's conference call to discuss profile Energy's third quarter 'twenty to 'twenty. One ended September 30th 2021. Following their remarks, we will open the call for a question and answer session I would now like to turn the call over to Steven Hooser.
Profile Investor Relations adviser.
Yeah.
Thank you Sherry and thank you everyone.
For joining us on today's call with me on the call today are co CEO and CFO, Ryan Oviatt 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.
Are not historical are forward looking statements.
This call contains forward looking statements, including but not limited to statements regarding ongoing regulation changes.
The company's expected growth the company's supply chain performance expansion in new markets.
The company's exploration of M&A opportunities the successful integration of acquired assets investments in research and development and the Companys future financial performance.
All such forward looking statements are subject to uncertainty and changes in circumstances forward looking statements are not guaranteed of future results.
Corporate performance and involve risks assumptions and uncertainties that could cause actual events or results to differ materially from the events or results described in orange dissipated by the forward looking statements factors that could materially affect such forward looking statements.
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 and time of this call and the company assumes no obligation to update forward looking statements to reflect subsequent events or circumstances.
As required by law.
Readers should not place undue reliance on these forward looking statements.
I would also like to remind everyone that this call is being recorded and will be available for replay through November 18th starting later this evening.
Will be accessible via the link provided in yesterday's press release as well as the company's website at Www Dot Pro fire energy Dotcom.
Now I would like to turn the call over to co CEO of profile energy, Mr. Cameron Tidball Cam.
Thank you Steven.
We welcome those joining us on the call today and to those who will listen to the recording in the coming days. We appreciate your interest in profile.
I will start our call today by providing some updates on the industry and our business then I will turn the call over to Ryan to provide a review of the financials. Following Ryan's remarks, I will conclude by providing an update on some of our strategic initiatives as well as some recent business development successes.
The third quarter of 2021 began with concerns over the resurgence of Covid due to the Delta variant. However has since demonstrated ongoing signs of progress and economic recovery.
Loosening or full removal of restrictions in some parts of the country has resulted in increased demand for products derived from oil and gas production.
Although we fully expect to see continuous change to policies and restrictions surrounding COVID-19 and potential variance. We are optimistic that the demand for hydrocarbon based products will continue to rise.
Indicators that impact our core business continued to improve and represent positivity for profile.
The average price for a barrel of crude oil increased 73% year over year and is currently trading at or near seven year high.
The increase is due to a combination of increased demand and constrained supply from U S producers as well as OPEC plus countries, which decided that their last meeting to keep production increases for November limited to the 400000 barrels per day that was agreed to earlier this summer.
Natural gas prices are also at seven year highs.
Commodity prices are expected to continue at least through the upcoming winter, but could last longer if supply constraints don't improve.
As we have shared previously higher commodity prices and future optimism has not spurred oil and gas majors to make material changes to their capital investment strategies. They remain committed to debt reduction reinstating and increasing dividend programs and maintaining production levels with the ongoing threat of reduced or.
Lack of capital availability to hydrocarbon producers, we see E&P striving to build up cash reserves as well as further industry consolidation in the future.
As expected profile benefited in the quarter from increased completion activity, which is evidenced by the DUC count decreasing 40% since its peak in June of 2020.
Several producers have begun reinvesting in maintenance capital, which has been deferred or eliminated during the last couple of years.
With that let me turn the call over to Ryan to discuss our financial results right.
Thanks, Ken.
As discussed we are pleased with the progress made in the third quarter, the oil and gas industry is critical to the energy needs of our world and our products and solutions remain a key component of our customers' operation.
Automation solutions that support safety efficiency and the environment will continue to be at the forefront of our customers' operational investment decisions.
The combined onshore rig count for the U S and Canada seems to have plateaued at just under 700 rigs recently.
The last time <unk> was above $80 per barrel was over seven years ago. When there were over 2300 active rigs the industry is certainly reacting differently to higher prices than it traditionally has.
Producers are maintaining production by utilizing the available duck as opposed to ramping up drilling programs.
Like Cam mentioned, the DUC count is down 40% from its peak and was down 12% in the quarter at this rate the existing docs could be used up in less than two years.
This is a short term bridge on a long term production decline problem for the U S shale oil.
These trends signify ongoing improvements for profile, though the pace of which is still to be determined.
Now, let me turn to our financial results for the third 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 web site. The transcript of this call will be posted in the coming days.
In the third quarter, we recognized $6 $9 million in revenue, which represents a 15% increase from the second quarter, and a 74% higher than compared to the third quarter of 2020.
Product revenues increased 79% as compared to the same quarter last year, primarily driven by improving customer demand associated with the ongoing recovery from the pandemic. Our service segment reported a 34% increase year over year as customers returned to maintenance programs that were largely deferred over the.
Prior year.
Gross profit for the quarter was $3 1 million as compared to $2 7 million in the second quarter and $1 5 million in the year ago quarter. Gross margin was 44, 9% of revenues a 90 basis point improvement from the prior quarter gross margin in the third quarter of 2020 was 38.
Percent.
Total operating expenses for the third quarter were approximately $3 4 million. This represents a $186000 increase sequentially as we continued to unwind some of the cost reduction efforts implemented during the pandemic.
On a year over year basis operating expenses increased 588, but remained significantly below our pre pandemic run rate.
Specifically G&A expenses for the third quarter increased 33% year over year.
R&D expense decreased 33% from the prior year quarter, depreciation and amortization decreased 1% from the third quarter of 2020.
Net income for the third quarter was approximately 92000 or nil per diluted share.
This compares to net loss of approximately 397000 or <unk> <unk> per share in the prior quarter and net loss of approximately $1 1 million or <unk> <unk> per share in the third quarter of last year.
A portion of the net income in the current quarter was achieved through the implementation of an updated transfer pricing policy and other tax planning strategies.
Cash flow from operations in the first nine months of 2021 was approximately 958000 compared to 123000 in the first nine months of 2020.
Our inventory balance at the end of the quarter was $7 5 million down from $8 4 million at the end of 2020.
We believe our current inventory levels, which represent mostly finished goods.
<unk> sufficient to address our customers' orders in the near term we are working with our vendors on product sourcing for the medium to long term to ensure we are well positioned to meet our customer needs going forward.
I will now turn the call over to Cam to provide an update on some of our strategic initiatives as well as some of our recent business development achievements and progress.
Kim.
Thank you Brian profile remains focused on preserving and protecting our core business, which is comprised of the upstream and midstream oil and gas energy sector, but continuing to drive specification of our solutions and adding new customers.
'twenty 100, BMS controllers continued to be utilized as we support customers in their eventual transition to the 'twenty 200 platform.
2200 controllers, specifically designed to enhance the performance and control of a wide array of burner management applications with more robust features than the 2100 2200 product line allows us to better support customer needs. The use of our burner technology acquired in the MVP acquisition in 2000.
19 continues to gain momentum with our customer base.
<unk> thousand 100 platform continues to support our initiative to expand our ability to play in new industries and markets. As we have shared on previous calls profile burner combustion management technology can be utilized on a wide array of industrial and natural enforce dress applications.
During the quarter or 3100 solution was utilized on projects supporting the mining biogas construction in renewables industries.
We are working hard to maintain this momentum as we continue to deliver on projects and expand our sales presence and channel exposure.
In the quarter, we engaged both in direct end user and channel partner conversations on potential projects and upgrades to thermo appliances utilize that refineries chemical plants metal forging biodiesel and food and beverage facilities.
We continue to invest in research and development that we believe is essential to the future of our core industry and its image as a clean and efficient part of the long term global energy solution.
This includes supporting the transition towards automation, including AI capabilities of E&P processing and production operations supporting producers as they shift towards quantification with reliable data of emissions improvements, which validate the reduction initiatives.
Our products and service solutions support and user initiatives to reduce methane and other greenhouse gas emissions.
Our controllers are installed on the equipment used for methane and volatile organic compound destruction and the data logging capabilities can be used for regulatory reporting in.
In addition to our controllers, our ancillary products like the non emitting fuel gas trains are designed to replace antiquated and leaking pneumatic systems, our combustion experience and knowhow enables our customers to improve efficiencies, resulting in less methane combusted, thus lowering cotwo emissions.
<unk> is also conducting research on how our product and service offering can support other industries and energy transition initiatives related to alternative fuel sources such as hydrogen.
As an update to our merger and acquisition strategy and efforts, we continue to assess multiple opportunities each quarter. As we have discussed previously profile maintains a calculated approach to acquisitions, so as to protect our culture excellent financial position and shareholder value we are.
A main focused on searching for transactions that will drive strategic growth opportunities for the company, while promoting essential ESG priorities for the industry.
Before 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.
Yes. Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Our first question is from Rob Brown with Lake Street Capital markets. Please proceed.
Hi, Kim Hi, Ryan.
Okay.
Hi, Kim Hi, Ryan.
Hi, Kim Hi, Ron can you hear me, yes, Youre alive go ahead.
Yes.
Okay, Hi, Ryan I, just wanted to get a sense of how things are trending into the into the quarter here and into the rest of the year.
Kind of reconciling your comments about some some slower capex spending, but more completions, but maybe just how are the trends going and how's the visibility at this point.
Yes.
Yes, thanks, Rob.
Great question.
We we certainly are seeing things improving and like we said.
Throughout other calls earlier in the year, we certainly see the second half of this year, improving and we were able to demonstrate that with our <unk>.
Q3 performance.
For sure.
We do think that Q4 is going to continue that trend.
We don't know is it going to be up from Q3 or or exactly where it will be there's always uncertainty when we get into the queue for December and November holiday season.
Customers.
Spending programs.
So we are optimistic that things will kind of trend in the same direction and that we should have a decent quarter there.
<unk> anything you want to add to that.
Yes, you covered it well Ryan.
We still as we mentioned in our comments, we're not seeing massive changes if any to drilling programs that were announced.
And revised throughout the year.
So we don't see that triggering any anything beyond what we've seen so far but as Ryan mentioned.
Activities up coatings up where we're definitely seeing some positive signs in our core industry as well as as we mentioned.
We continue to just build that pipeline outside of oil and gas. So all things pointing in the right direction, However, holiday season, sometimes and hunting season.
Holiday season, I think in Texas So.
It's all part of the overall results that we get in the fourth quarter.
Okay.
Our next question is from John White with Roth Capital Partners. Please proceed.
Hey, John.
<unk>.
Good morning to you.
Really strong revenues I was very happy to see that.
In the.
Cans opening remarks, he did you talked about oil and gas and I know you've talked about E&P.
Completions.
And then in his closing remarks, he talked more about the diversified your effort to diversify business.
Out of the E&P.
Can you talk a little bit about.
The split between E&P and all the rest of your business in terms of revenues.
Yeah, we normally as you know, we don't quantify it out quite yet.
The way we.
Really upstream midstream and downstream transmission is still the lion's share of profile business in it and it will be.
But as we continue to gain traction.
To win projects outside of oil and gas to generate leads through some of our marketing initiatives and paid advertising as we get more and more we see that.
The definitely contributing definitely being something that moves the needle or is quantifiable.
I think we mentioned on the last call where over 30 projects that number increases here in the quarter.
And but the pipeline of opportunities the pipeline of contacts both directly brought into profile that we've found or through some of our channel partners that we're working with it.
It continues to grow so very exciting for us.
Our strategy kind.
Kind of mentioned it alluded to it.
We want to preserve and protect what we have that's our backyard. It's what we're great at and we do.
There is no reason to give that up we're the dominant player in that space. So we will continue to preserve and protect and even grow that business.
But we know it's very dependent on things like drills completions.
Commodity prices.
More lately purely completion.
But that being said we believe we have the bandwidth. We believe we have the roadmap and most importantly, we believe we have the product suite that we think we can we know we can play in some of these other industries. So we will continue to push in those areas as well while protecting the house the key as it were.
Okay.
Thanks to that 30 cross projects.
Do you mean 30 projects away from oil and gas.
Yes.
I think we mentioned on the last call. It over 30 in the last 18 months outside of oil and gas and we keep building upon that.
That's great.
And again Cam in your closing remarks, you made a comment about reduction in.
Application of one of your projects, resulting in reduction of Cotwo emissions and I missed the full comment alright.
Got distract yes.
Yes, definitely so we're doing some research and its research right now, but we know that our customers. So they were on their heaters, we know that they report something whether it's the states or EPA and we know thats going to change based on President <unk> remarks here earlier this week in Glasgow we.
No thats going to change we felt that for a long time.
These producers right now don't really know how much gas they are burning in our estimation.
And you burn gas youre going to get <unk> as a byproduct. So right now everyone's talking about methane methane. The first thing that you got a target because it's 84 times worse than Sidoti with Sidoti is going to be the next thing and so that's why our research includes both of how profile can play in those worlds whether it's through.
Acquisition, whether it's some of our own development, but on the <unk> side, you run a more efficient burner youre going to have less cotwo. If you are able to.
Quantify what youre actually Bernie.
We believe e&ps have a win right off the bat from where they're currently claiming because today and let's say put in some very expensive technology into every heated appliance.
They don't really know so right now our belief is that they report based on the total.
High level like duty that an actual heater can do and that's grossly overstated. We believe so if we could help them and we're working on some some of our product configurations as well as <unk>, coupled with the 2200 and a 3100 to be able to help them quantify its still in research stage right now, but we feel thats a very.
Compelling thing to look out for us.
Well I know research has been an important part of your business development. So that's very good to hear.
Al.
Pass the call back.
Thanks, John.
Our next question is from Jim the calorie with Dawson James. Please proceed.
Hi, Thank you.
Hey, guys.
Let me just throw out the three questions I have and then I'll.
A lot of.
Put myself on mute.
First can you talk about pricing trends.
Second.
I'm, a little bit confused by the inventory comments.
<unk> had a reduction in inventory your turns are improving.
But then you also make comments about supply chain I'm, just trying to kind of puzzled through that.
And then lastly, Ryan I think that you talked about expenses.
In Q3, but did you make comments about what levels would be necessary.
In the coming quarters, and that's it thanks a lot.
Yes, Great question, Jim will we will try to make sure we get through all of those.
Make a few comments and Kevin can add to them too.
On pricing.
<unk>.
We haven't had.
Our strong history of modifying prices are changing prices on an annual basis or things like that in the past, but in the current environment in light of inflation and all the pressures that we're seeing we are in the process of implementing updated pricing for our customers and so there will be some price increases as we go into next year.
And we'll monitor that situation.
On a frequent basis and regular basis.
We make adjustments ongoing if needed as we continue to go through the next year or two and see how the situation plays out.
In relation to the inventory comments.
There's obviously lots of concern as you are aware just in the overall economy from groceries to gas to everything we buy on supply chain issues. So we have our inventory has come down we've been using a lot of our.
Inventory is we're servicing our customers we still have a good supply of inventory, we typically carry more inventory than a lot of companies would do and we've had a history of that.
But at the same time just the other comment there was that we're continuing to monitor that situation, we're continuing to work with our customers in anticipation of potential.
Additional problems or greater problems on supply next year, we are looking at placing and some more advanced orders to try and get ahead of that and we have a sizable amount of cash and liquid investments on our balance sheet and right. Now is a situation, where we might be willing to exchange some of that for inventory.
To make sure that we can still.
We will supply our customers' needs and meet their needs in this environment. So.
Hopefully that answers that question and then your question on expenses.
Going forward for the future.
It's kind of one of those crystal ball things I would hope that we can get.
Inflation under control and start to have it stabilize or not going and the pace, it's been going for the last several months.
But that is certainly something that we're facing we're seeing it in all of our operating costs and our labor costs and things like that it's forcing some turnover.
We're working hard to deal with to address those people when they leave but also to find ways to keep our people happy and make sure that they're not leaving and that we're able to retain them. So.
Unfortunately, we do think that we're going to still see some of that cost pressure how much are costs going to increase.
I don't fully know, but like I said in the beginning we are trying to combat some of those increases by making price adjustments to our products as well and hopefully trying to even some of that out.
Jim anything you want to add to any of those questions.
I'll just briefly mention on the pricing trends.
As Ron mentioned, there isn't anything that isn't really going up right now.
To a degree we believe our customers expected. We believe we have a good story to tell with regards to Wi Profiler does this.
We are a value sale, we're not a price sale, we sell value we sell expertise we sell accessibility to.
Everything from Tech support to service to engineering.
The suite that we offer our customers we feel fully warrants this and so we don't expect.
A lot of pushback on this it's the norm, but we're getting we're giving we're going to do the norm with the value. So we believe that we have a compelling reason to do so of course, but other than that Ryan here here. Thank you.
Our next question is from James Jang.
With <unk> Securities.
Please proceed.
Hey, Joe Hey, guys How's it going.
So.
So.
I was pleasantly surprised by the quarter.
Getting their breakeven.
In this environment I think thats.
Well, that's a testament to what you guys can do.
But I have.
Question is on short term and long term so short term can.
Can you tell us have you been have you been receiving more inbound call Nat gas producers versus.
Crude.
Great question, so in the short term.
It's a nice balance.
Obviously the northeast.
Been a stronghold for profile for years, and you get a lot of Nat gas there.
Had some pleasant surprises from Canada.
The Clearwater shale plays.
Definitely picked up and Thats commodity price driven for sure.
But I Wouldnt say that were out of balance of where we normally are between oil and gas because many of our customers play in both arenas except for of course in the northeast.
Particularly for the most part gas over liquids.
But we continue to be strong in the liquid heavy places like the Permian.
So nothing out of the norm there James.
Okay.
I was thinking with what's going on with Nat gas prices and with the geopolitical.
Issues are going on with Russia, I don't know if the U S producers or the Canadian producers.
Kind of look towards more.
Gas as a long term play versus.
<unk>.
Well.
Yours mind and everyone's comments on this one and somewhat right I guess, but when I kind of again this holiday.
Yeah.
It's evident our acquisition in 2019 of the mid flow the mid flow acquisition of that company, we know that natural gas and we believe natural gas is critical. We also believe crude is critical for a long time. These wonderful policies that exist in turning everything green overnight and <unk>.
Trojan in wind and solar that's fine that's going to happen.
Equate it to actually talking to a trusted friend yesterday said it seems like some of the way that R.
Our policy is going is like when you weigh 300 pounds and you you're going to get to 200 and you throw out all your genes in your bite sized 32 before you get there.
That's kind of what I see is going on we cannot throw out all of this.
Good and reliable and for the most part cost effective energy when our world just demands more and more of it every single day. So I don't want to go on a tire enter our rents I do believe that.
There will be a transition but.
We try to preach that maybe we shouldnt quit our day jobs before we get new ones and new ways to pay the bills.
Energy, especially natural gas we know us.
Huge transition fuel and Mike, we think will always be around crew.
Crudes Im looking at everything at my desk, right now and I don't think I can named something on my desk that isn't produced from crude so unless we're going to start floating.
At work and at home.
And not need any of that.
It's all of that going to be there. So don't know if that answered your question James or Ryan. If you wanted to correct anything they're more than happy to have you do it.
Okay.
No good analogies.
Alright.
So looking more long term so.
That's two one is a cam I know youre in Canada.
Is there is there a tangible risks right now between now and the next five years, where subsidies to the to.
So the two players start to ease a bit.
You'll have to subsidies to the crude players would ease the Gulf closing prices producers.
Yes.
Claim ignorance here James I don't know what subsidies the producers are getting right now.
Okay.
The impression that the oil sands producers and folks like that the sector. So maybe it's not as direct subsidy, but the cost is subsidized.
By the government to a degree.
Okay. So if we're talking oil sands there may there may be parts of that when you talk about where profile plays which is not so much the oil sands where more than like the.
The southern part of those plays that Fort Mcmurray stuff profile doesn't live in that area. So there could be some there could be subsidies there and the rest of the.
The shale plays and basins in Canada, I do not believe there are subsidies. So that is something obviously trudeau has come out as well with his 32nd speech in Scotland and.
We're going to change the world.
One election at a time.
I don't know we have to we will watch that we know is going to come down hard or he's going to try to the problem or I guess the opportunity is in Canada. The feds can only do so much of the province holds more rights over natural resources than that of the feds So in Canada.
Trudeau can push around a lot, but he is he is more limited than them in the United States.
Gotcha Okay.
And the last question here is like.
Mike you alluded to there I think we're all aware.
Oh.
The energy mix is going to be more green than it is now.
Whether it's solar or wind or hydro.
And.
<unk> usage and demand.
I don't know if we've hit peak and.
It's going to decrease but.
In a world where crude demand starts to fall.
What kind of strategies implemented to kind of pivot mainly.
Maintain growth for our profile.
Yes, Great question, James I think those are absolutely things that we're looking at we fully believe that.
There is a trend for greener energy and that theres going to be more more solar more wind hydrogen is a big push and at some point it will.
Hopefully add to the mix.
Our belief is that that's going to take more time than a lot of the estimates there is all of the estimates over the last five years had it ending within five or 10 years or peaking within five or 10 years.
And I think right now that those predictions are being stressed tested.
In the current environment in <unk>.
Certainly there is a runway there, but regardless of that we think in that five to 10 year horizon that we need to be able to transition with that and so as candidates comments.
In the beginning talked we are we are certainly looking at.
Ways to participate in that and as we move towards blended fuels or even an eventual.
Hydrogen combustion arena, we think we have a significant place to play as combustion experts in helping industrial customers and large producers move down that path along with with other areas of focusing on the reduced emissions and making oil and gas itself.
Lenor along the process, there, which hopefully would also extend its life and maybe even the peak out further but the crystal ball is not mine I wish it was.
Okay.
And last question here obviously.
So a little out of left field, but would you guys look to acquire.
Some type of CHP company or somebody that works with.
Waste energy to transform that into energy.
It's just a little outside of your scope, but it's kind of in the same neighborhood. So I don't know if you guys are kind of looking in that arena as well.
Yes, we definitely look in the neighborhoods James again, it does need to make sense and needs to fit but.
That fence, we put out there of what could fit.
Its pretty wide.
Where we're not everything I don't think were going to merge with.
Stan Socs, although I'd like that Stan talked but.
The companies that are in similar energy there in energy. It doesn't just have to have the name of course, but absolutely. We're brought in our view of that.
We think that we can't just be narrow minded and just think burner burner burner oil oil oil.
But we also do think when you look at energy transition who are the who are the companies that are going to be involved with that well, it's going to be your major.
E&ps, they're going to be involved and as profile as a trust as much as we are a small part of the overall machine that drives the energy industry, we are tiny.
We are a trusted partner for so many customers the things that come in the door and things that we're looking at as part of some of our research and development. It is how do we be at those ground level discussions with.
With producers of where what are they thinking what are they going to need in the future what pain points need to be solved and so.
We believe theyre going to be at the forefront of energy transition because their energy companies and whether it's oil and gas or hydrogen or solar hydro theyre going to be involved and they're not just going to run out and wait until there is the share price goes to nothing theyre going to do something and we think we'll be right there with them.
Okay excellent all right well thank you guys.
Our next call.
Thanks James.
Our next question is from Alright, Carl with Cole capital. Please proceed.
Thank you.
And again, thank you for doing the call today much appreciated too.
Two quick questions regarding your sales force some could you give us an update on the number of quota carrying salespeople you have at the company and their levels of experience.
Yes <unk>.
Yes, you betcha.
We are forgive me I don't know the exact number and I should but we're approximately I would say like 18 to 20.
Sales team members.
A variety of experiences within them.
Proximately.
I would say, 75% had been with pro fire for at least four or five years.
And some of the recent hires we brought on have specialized skill and some of the areas outside of oil and gas, but dealing with combustion. So a high experienced level for us we often tout that profile between our sales and service and some of our business development team members has over 400.
Years of combined combustion experience.
As well.
Understood and with.
With demand picking up in the near term.
Two two.
What degree do you have what number I guess of open reqs do you have is trying to hire some additional salespeople.
Great question again currently right now we do not have an open posting we're obviously going through budget season for next year. We are considering the addition of.
More resources or resource, especially to focus in some of our initiatives outside of oil and gas.
The nice thing about our our sales team.
It's a double edge sword, there probably needed to do $20 million a year, but they can also do quite a bit more with the capacity, we have and it's not just because they're they're waiting it's just as the orders get bigger they can handle a lot more capacity.
Some of our sales team members, we double dip with what they do we want them to produce opportunities in the downstream side of midstream, which is the big plant operations.
Some of them do outside of oil and gas business development as well as in and then we have some territory sales team members, who are in larger territories, where they.
They don't have the capacity.
Just because of customer base and market share to add onto that so they kind of just focus on on the.
The single areas the upstream midstream space.
Okay and then just.
On the supply chain.
As you hopefully are in a position to.
Sell your finished goods inventory that you have been stock today, and then need to replenish.
Have you figured out how many.
Weeks and months it will take for you to.
I guess, how much time will take between ordering and receiving all the various parts you need for your burner management system and other products when you contemplate replenishing our inventory.
Yes, that's a good question, it's absolutely something that we monitor very closely as we place each order going forward and it depends on on the products. If you are talking about are our BMS systems the boxes themselves.
We typically order those in fairly large quantities and again, that's what we have a lot of inventory and some of the components are very long lead times.
<unk>.
Three months six months, some even longer than that and those times continue to change. So we work very closely with our vendors on that and we work to order in quantities that are big enough that carry us through those periods and even beyond with some safety stock there and then as.
As we look at the package solutions like the BMS solution with a fuel train and all of the components that go with that we work with each of those vendors most of which are third party, who provide the valves or <unk> those types of things.
And again through their lead times, we've seen some of those go up we've seen some of them improved slightly in and we work with that relationship as well to make sure that we have good visibility into all of that so it is certainly a challenging environment.
But we're very active in working with our suppliers and looking forward and trying to meet our needs and even predicting what our customers are going to need is quite a challenge given that we just don't have a long term view into their ordering patterns or processes.
Got it and just a final question for me regarding diversifying into other verticals regarding your P. F 3100 product line.
You had mentioned there were 30 projects that I believe if I understand correctly or in the kind of a sales pipeline one of them.
The value of those 30 projects, if you happen to actually close on all of them.
So actually the.
The 30 projects and it's a higher number than that but.
$30 40 projects those are actually already completed outside of oil and gas with the 3100 solution and average sales price on those has been anywhere from.
5002, I think we have some approaching six figures outside of oil and gas.
And so those have been those have already been completed and those are in the like the last 18 months.
Going forward, what's in the pipeline, while obviously, we hope to have some repeat business. We've already had repeat business from some of these customers and.
In the pipeline is significantly higher in terms of the types of discussions we're having the opportunities the appliances that we're scoping out to see if we are a fit.
Some of the technology providers.
We're in with them. So that we believe is where we have some some momentum into the future. We're going to continue to work hard on it because we've invested more into that team.
We're going to consider further investment into that team to expand it as well as consider or their channel partners that makes sense in certain industries or potentially some of the larger channel partners, who are in a bunch of those industries. So combination effort for.
For diversification.
Okay, and just last time of 3100.
Believe when it was introduced it was obviously best in class product in the industry. The primary competitor was Honeywell, which had had a an old product, which hasn't really been updated.
What if anything is honeywell down to kind of update and upgrade their product. So it's more competitive.
Are they sticking with the product line that was introduced originally in 2012.
So Honeywell does have.
We'll call it a competitive product thats, a different way of doing it but when it comes down to its burner management flame safeguard.
It's called the Honeywell slate so it is out there it requires.
A different type of skill set to program to implement as well as its got to go through the Honeywell network of suppliers.
Is everything from HVAC companies to system integrators et cetera.
So how does it compare.
They're not apples and apples, although what they do is apples and apples.
Normally.
I guess the 3100 is now we're getting.
To about five six years of age with it.
Still it's a very powerful system. It can do a lot. It is not meant for everything that's for sure but it has shown to be very effective in some of the applications that we're finding outside of oil and gas. We obviously had to test it try it out with customers. When we knew and we are using it still still the lion's share of <unk> 3100 sales.
<unk> is an upstream midstream and the upstream midstream and downstream transmission businesses.
But we know that it can fit into things like refineries and chemical plants that can be used on a variety of applications.
That are outside of oil and gas.
In terms of what's Honeywell doing they are really sticking with development as we have on their slate device. They still have the old burner management technology, they've had for two decades, just a little tiny module really it has to be paired with a bunch of other things that still sells that's still a competitor to us as well.
Good well, thank you very much and I wish you the best of luck going forward here hopefully.
Business will continue to be stronger, which is always a more pleasant environment to be operating in.
Absolutely.
Absolutely thanks area.
We have reached the end of our question and answer session I would like to turn the call back over to management for closing remarks.
Thank you everyone for joining us on our call today to discuss our third quarter 2021 results, we'd like to thank all of you for your continued support and as always we're available for any discussions or questions that you might have we want to remind you that we will be participating in this three part advisors southwest ideas conference.
<unk> in Dallas on the 17th of this month, we hope to see you. There if you can make it and thank you and have a great day.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yes.
[music].
Yes.
[music].
Okay.
[music].
Yes.
[music].