Q3 2022 Profire Energy Inc Earnings Call
Good morning, everyone and thank you for participating in today's conference call to discuss the profile energy third quarter 2022 ended September 30th 2022.
I'll now turn the call over to Steven Hooser Investor Relations for the company. Please go ahead.
Thank you operator with me on the call today is profiled as co CEO and CFO, Ryan Oviatt and co CEO Cameron Tidball yesterday after the market closed profile filed its Form 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 investor.
Section of the company's website. The transcript of this call will be posted in the coming days before we begin today's call I would like to take a moment to read the Companys Safe Harbor statement.
Statements made during this call.
Historic are forward looking statements.
This call contains forward looking statements, including but not limited to statements regarding the company's expected growth and strengthening of the legacy business increased inventory purchasing and planned launch of new products. The focused of reduction of emissions. The continued collaboration with customers anticipating anticipated work.
<unk> the availability of company resources to make beneficial investments in 2023 and beyond and the Companys future financial performance.
All such forward looking statements are subject to uncertainties and changes in circumstances.
Forward looking statements are not guarantees of future results or 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 forward looking statements factors that could materially affect such forward looking statements include.
Economic business public market and regulatory risk factors identified in the Companys periodic reports filed with the Securities and Exchange Commission.
All forward looking statements are made pursuant to the safe Harbor provisions.
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.
<unk> 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 November 17th 2022. Starting later this evening it will also be accessible.
Via the link provided in yesterday's press release as well as on the company's website at Www Dot profile energy Dot com.
Following the remarks made by Ryan and Kim We will open up the call to your questions now I would like to turn the call over to co CEO and CFO of profile energy, Mr. Ryan Oviatt, Brian .
Thank you Stephen 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 continued recovery across our legacy business. The exciting progress we are making in our diversification efforts and overall company outlook.
As we communicated in our pre earnings announcement on October 10th this has been a great quarter for profile not.
Not only did we see significant recovery in our legacy business, but we have gained meaningful traction in our diversification efforts both.
Within oil and gas as well as in other exciting industries.
Our third quarter results reflect the continued strength of our business and the need for our products within the oil and gas industry.
Our revenue gross margin and gross profit increased both on a sequential and year over year basis.
This period represents our third highest quarterly revenue in company history, and our best net income and EBITDA since the first quarter of 2019.
The North American oil and gas industry is in a strong position currently and we believe is likely to remain so for the next few years, even though in many ways. It is still recovering from the lows of the 2020 pandemic.
Rig counts have continued their slow and steady increase which are up 16% from the prior quarter and 49% from the same quarter a year ago, but remained 7% below the average from 2019.
Completion activity has been steady over the past two quarters at an average of 970, well completions per month, which is still below the 2018 to 2019 average of 1200, well completions per month.
This is in addition to the fact that E&P companies have underinvested in exploration maintenance and new technology over the past five plus years.
We believe the combination of these industry indicators and global.
Oil and gas supply challenges is positive for profile and the North American oil and gas industry as a whole.
We believe these signals point to strengthen our legacy business for the foreseeable future as customers continue to need our solutions.
For new well completions and as customers look to reinvest in existing assets to upgrade technology.
No no quarter.
Gross margin in the third quarter was 47.7% of revenues compared to 45.7% in the second quarter gross margin increased 280 basis points compared to the third quarter of 2021 due to better fixed cost coverage, resulting from the higher revenue base.
We continue to battle inflationary pressure on gross margin, but are excited to see our margins back at higher levels that are driving greater value for our shareholders.
Total operating expenses for the third quarter, where approximately $4 million compared to four $3 million in the second quarter and $3.4 million in the third quarter of 2021.
The sequential decrease is attributable to the recognition of an employee retention tax credit earned under the cares Act.
Without this reduction in payroll tax expense are operating expenses would have been roughly flat with the previous quarter.
The year over year increase reflects head count increases in the ongoing inflationary cost pressures on our business, particularly higher cost of freight shipping and labor.
Specifically G&A expenses for the quarter increased 15% year over year R&D expense increased 50% from the prior year quarter.
Depreciation and amortization decreased 8% compared to the same quarter a year ago.
Net income for the third quarter was $1.2 million or two per diluted share.
This compares to net income of approximately 285 or one per diluted share in the second quarter and net income of approximately 92000 or breakeven on a diluted share basis in the third quarter of last year.
Cash flow from operations in the third quarter was a negative $1.8 million compared to a negative 598000 in the prior year quarter.
This quarter strong operating cash generation was offset by increases in inventory and accounts receivable.
Our inventory balance at the end of the third quarter was approximately $10.2 million up from $9.3 million at the end of the second quarter and $7.2 million at the end of 2021.
Are proactive in strategic inventory ordering year to date has enabled us to achieve the strong results of Q3, while rebuilding some of our typical inventory held.
We believe this strategy will be necessary for the next 12 to 18 months as many suppliers see ongoing supply chain challenges through early 2024.
The increase in inventory is largely come from the third party products, we use in our solutions, which have been a little easier to get than the system components chips microprocessors and electronics that are necessary to build our proprietary BMS systems.
We have funded these purchases through our available cash balance.
At the end of the third quarter, we had approximately $14 $5 million in cash and liquid investments and we remain debt free.
I will now turn the call over to Cam to provide an overview of our business Cameron.
Thank you Brian .
As evident by our queue three results pro fire continues to gain momentum as we have now achieved six consecutive quarters of top line revenue growth.
Our quarter over quarter and year over year growth demonstrates our ability to scale and represents 33% and 85% growth sequentially.
We are encouraged by the improvement in our financial metrics and performance.
They represent a direct result of our team's execution of our strategic imperatives.
We remain focused on protecting and growing our legacy business.
And adding meaningful revenue in areas of diversification.
In the third quarter we.
We continued to see increased demand for our products and solutions enabled by a strong market share and our customers ability to focus capital on drilling and completing programs retrofits and upgrades.
Our legacy business experienced one of our strongest quarters in company history. This.
This strength was experienced across our entire legacy business, including our upstream midstream and downstream utility segments throughout the United States and Canada.
New customer and project wins were supported by an improved inventory situation in the quarter.
Although we expect continued stress on supply chain, we continue to to proactively look for solutions to match customer customer demand.
Strategically build our inventories.
Drivers that impact our traditional business include commodity pricing rig count well completions as well as north American oil and gas production.
In the quarter the average WT I price per barrel was $93, which is a 15% decrease from the previous quarter. However, a 32% increase from the same quarter last year natural gas prices remain high and averaged $8 for the quarter.
The combined onshore rig counts for the U S and Canada averaged 942 in the quarter, which is up 16% from the previous quarter and 58% from the 2021 full year average.
The U S drilled, but uncompleted well count or duck count remained relatively flat. However is down 51% from its peak count in June of 2020.
Global oil and gas supplies remain constrained due to the ongoing Russian sanctions and unwillingness of the U S administration to loosen restrictions on domestic production.
The release of oil from the strategic Petroleum Reserve is provided limited relief to consumers and the recently announced plans to replenish the stockpile at $70 a barrel is unlikely to be implemented in the near term.
Meanwhile, the production cut announced by OPEC plus last month will likely keep prices in the 80 to 90 dollar range next year. According to the AIA as outlook.
The fundamentals that drive the success of our legacy business continue to be strong.
We remain optimistic that demand for North American hydrocarbon based products will continue to grow in the short term and through 2023 and 2024.
Our backlog of orders has reached historic levels and continues to grow.
Existing size and operational structure are able to support current demand and growth with minimal requirement for headcount additions or allocation of capital.
Key to the success of the third quarter, we were able to achieve our strongest quarterly results to date and diversified revenue related to our growth in midstream plant operation and non oil and gas projects.
On October 10th we released preliminary third quarter results, which highlighted significant growth in our quarterly diversification revenue.
Nearly doubled our second quarter diversification results to approximately $1 million or seven 7% of total revenue for the quarter.
And the fiscal year, we have completed diversification projects for over 60 different customers.
The industries, where Profire solutions can now be found include large treatment midstream plant operations manufacturing infrastructure and construction agricultural.
Landfill LNG mining and metals biogas renewable natural gas food and beverage petrik, chemical and refining power generation and water and wastewater.
In the third quarter, specifically, we completed projects involving specialty metals manufacturing industrial heat treating and drawing landfill methane destruction in support of EPA requirements food.
Food processing and production and destruction of hydrogen and advanced materials manufacturing.
We also continue to support projects that are critical to the production of renewable natural gas.
We continue to build our reputation in these new and exciting markets.
Just on customer feedback on our products solutions and project execution repeat business as well as our growing opportunity pipeline, we remain optimistic about our ability to continue to grow and expand these business dreams.
Turning to our research and development initiatives, we maintain a balanced focus on short mid and long term development and investment. This strategy enables us to focus on bringing additional solutions to our traditional industries, while preparing for the future.
Our research and development efforts continue as we collaborate with customers to develop technology focused on improving efficiency and lowering emissions of heated appliances.
These efforts to support our customers as they endeavor to implement ESG initiatives related to overall GHT emission reduction.
In the quarter, we continued to work with customers, who are trialling, a potential new solution, which will provide low cost monitoring and opportunities for efficiency and carbon footprint reporting of their heated appliances, we initiated quoting activity in the third quarter with the goal of converting our beta customers to paid subscriptions our plan is to.
Continue with strategic Indra introductions and increased quoting activity in the fourth quarter as we continued to ascertain product suitability in traction.
Profile remains in a solid and exciting position.
We believe our value proposition to our customers, both current and future as strong.
Our technology solutions provide multiple industries with safety reliability compliance operational efficiency and environmental protection.
Before turning to the Q&A session Ryan I. Thank each of you for your interest in profiling, we appreciate your confidence and support and our management team.
We thank our team members for their commitment to our customers success we.
We appreciate what they do each day to improve our amazing culture and team again, we thank you.
Operator will you please provide instructions on and begin the question and answer session.
Certainly.
Will now begin the question and answer session to join that question care you May press, sorry down the line on your telephone keypad.
Here at <unk> acknowledging your request.
Anything in speaker phone, please pick up your handset before pressing any key.
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<unk>.
My first question is from Rob Brown with Lake J capital markets. Please go ahead.
Good morning, Robert Q.
Mhm.
Thanks for taking my question.
I just wanted to get a little bit further color on the pipeline of the diversification projects that are diversified revenue projects that you are talking about you said the pipelines building I think.
Sort of how does that kind of come in.
You have any sort of visibility your backlog in the business at this point.
Yeah. Thanks, Rob.
Yes, we do have.
Some visibility obviously, it's a it's a growing initiatives. So it's always a challenge you gotta keep filling it but the fact is we're getting.
Repeat business repeat projects with.
The same end users Oems and some of the resale partners or EPC is at work in this space. So it's really a focus of continuing to get the message out that hate profile place in this area.
Introducing the team the process that we bring to these types of projects which is.
It's our own might be slightly different then.
The incumbents, who have been in that space for for decades, but.
We're really the new Kid on block on the block when it comes to.
These diversified industries.
Can't really walk in and say Hey, we're profile like we do.
For the upstream midstream and downstream business utility business, but in this space, we're able to to go in and if we get that opportunity.
We find that our our project process the customers are liking the.
The products themselves, while we already know they work there.
They are finding out that they work and then it's learning.
New types of vernacular.
New types of processes, where professors to dig in and but really when it comes down to it.
The crossover so applicable between what we've built.
So what does the pipeline looked like.
Building, we're making new contacts were putting out new bids they 10.
And to be larger sized projects, which is great. But we're also getting some of these really quick transactional ones as I mentioned I think over 60.
Customers that we've sold to.
Two this year.
Which is great.
Last year was a.
A third of that right. So we will continue to see this growth.
Okay, great thanks for that that color.
The core business.
Talked about a pretty good demand environment.
What are you sort of seeing as this this plays out into the rest of the year next year do you do you have some.
US into the customer thinking do you feel like this debate environment continues or is it still.
Great visibility.
Well.
As we mentioned our backlog in pipeline is is that historic levels and it's growing.
This is a luxury was never really had before we get purchase orders coming in into the to the next quarter quarters.
Like we have before and this is in part we really educated our customers last year.
About getting the orders then because if you want them.
It won't exist, if you don't get them in and even with that strategy, we're still as we mentioned.
We're still dealing with strain.
Everybody is.
For the most part we look at the quarters coming up that they are customers are not.
They're not coming out, saying, hey get ready, we're going to go crazy like we have in the past, we don't see North American shale production.
Drastically growing up but I think it was in August and we we got two 2019 levels, which is 12 million.
Barrels per day or close to it.
I think we could see that still pick up and if that is going to happen more production as required more drilling is required and more completions are required which all are are great places for profile, but we also do have some retrofit projects in the pipeline ones that we've been working on throughout the.
Throughout the year.
The quarter, and we see opportunities in that as well because our customers, although there's still returning.
Profits to shareholders through dividends are share buybacks.
They are also investing in there are older legacy equipment with retrofits.
As companies are acquired and independence jump out of the game and majors take over more.
They're upgrading their fields because they just don't have the human and people power to take care of it.
I don't even think we can call them traditional ways anymore, because traditional is becoming.
Putting in Vms, but.
I think that it looks strong.
For the coming quarters.
Okay, great great. That's good to hear and then and then maybe last question and just sort of the supply chain.
Cost structure margins pricing that kind of thing.
Are you are you able to get the price increases or or how're, you sort of managing the price increases versus the cost increases.
Well Ryan lunch you tackle that one.
She would.
For sure Thanks, Cam and Rob.
Overall the supply chain is is still a challenge we've certainly found it.
Alleviated or gotten better in certain areas.
And then in other areas it continues to be sick.
Significant struggle so.
As I mentioned in some of my remarks, our inventory balance we've been able to grow our inventory.
By getting a lot of the ancillary products third party product that goes in our solutions and that's in anticipation of when all of the systems are able to come in and we were able to get those that we can then ship out and fulfill orders right away. So it's a bit of a different dynamic than what we've had historically for our business.
But.
What we're hearing from from the suppliers, where things are challenged right now which is more of those system components the microchips Mike.
Microprocessors electronics that type of stuff a lot of that we're still seeing that it could be into 2024.
Before that is really alleviated.
Obviously, there's lots of dynamics macro pressures that are impacting that but we continue to see those challenges and as you said one of the ways that we try to deal with that is in price adjustments for our products.
We have been going through the process of refining.
Refining our system a bit that will make it easier for us to make these types of price increases on our quicker basis.
And we are still doing that we're continuing to look at our ongoing input cough and as those are increasing.
We're looking to make changes on the price side as well again.
We can't go crazy on price increases, but we need to be able to pass along the increases that we're seeing in and so far our customers, even though they may not like it.
Understand it and and they can see with it and and we don't see that it's impacted our ability to deliver or to sell to our customers.
Okay, great. Thank you I'll turn it over.
Thanks, Rob.
The next question is from John fight with Rock capital. Please go ahead.
Good morning Guy.
Good morning, Congratulations on the nice very nice improvement in your business.
Thank you.
Yeah.
And the list of industries from where the new businesses coming from that you read off she is very.
A very lengthy and very diversified.
Over the past year or so have you added some marketing people that have.
Specialized expertise in some of these industries, where you're getting new business.
Or is there something else you are doing from a marketing standpoint.
Generating the success you are saying.
Yeah.
It was truly an as a as we heard on the call a mouthful and.
You're like well he just beamed every industry well not really but.
Those are are truly all the industries that we've done projects, then and all this year, which is incredible.
And you can see that it's diverse.
How are we getting to this well one is we have put the team in place.
And they have been functioning for the full year. They also had a portion of last year.
In a couple of the team members even before then so that's building that that reputation we haven't added anybody new in 2022 to this in terms of a marketing focus we are of course looking at opportunities.
Invested in belonging to some association some groups.
But it's really just getting out there.
Some of the Oems and systems integrators, and <unk> that live in the spaces. They also have a wide variety of ability to work in different industries and that has really been our focus.
Again, we're not going to show up well I shouldn't say this we do it but you can't really show up at a pulp and paper mill, which I didn't mention I guess I could have.
And say Hey, we're profile here to do your burners, we can do it you really got to begin with the.
<unk> at supply the equipment, especially when it comes to to dealing with.
Incineration of by products or of excess gas on the site.
That's where you really see great opportunities and we have many partners that we've leveraged from within oil and gas as well as new Oems that we've met through just the course of business development, who had been able to support us in this so it's a variety of the above we're looking to doing more of them the marketing push on it and try to bring.
And some some low cost of acquisition leaves and things like that that is a strategy we've been working on here in the quarter.
<unk> quarter forward and hopefully get some of that launched in the in the first quarter of next year.
I really appreciate the detail on that.
Very nice answer and I'll I'll patch attached to call back.
Thanks, John Thank you John .
The next question is from Jim Kelly with Dawson Jane Security. Please go ahead.
Hey, Jim.
Hey, guys. Thanks.
And good morning.
I just wanted to.
To understand a little bit better about the increase in revenue in Q3 relative too cute too.
And.
I've come up with three potential explanations I'm wondering if you kind of.
Address those and maybe there is another out there also.
One is we could have just seen a shift in the in the industry to a higher level of activity.
Secondly could be the customers are are pre ordering.
They're trying to do the same thing with their inventory that you are doing with yours that is.
Holding onto inventory.
Pre buying it because they they're worried about supply chain issues.
And then another reason could be is that you've just done a good job with your inventory levels, and so you're better able to supply demand, which in past quarters you haven't.
And again can can you comment on those theories and and maybe there's something else going on that would.
That would that we can attribute to the increase in sales in Q3.
Yeah, I'll I'll started off and if I Miss one of the theories Ryan will pick up the slack, but I'll I'll start off and pass it over to Ryan, but yes, there is a shift in the industry for sure stability.
Stability is always good now if you look at Okay profile had quite an increase Q2 Q3.
Did the industry pick up that much no.
But there is a bit of the shift in the industry, where little more comfort gotta get these systems automated winter's coming.
That's always a nice thing in Q3.
Customers Preordering, there is a part of that but.
Normally end users will not preorder too much.
Inventory, but we see that in our backlog and pipeline and the delivery date, so that people have put.
Put out there there's a bit of that so good theory as well.
Are we doing a good job yeah, I think we're definitely doing a good job on the inventory side of things. There's definitely some of this revenue that potentially could have been in Q2.
I think we mentioned that on our queue to call. We would have probably had a better quarter. How do we have the inventory. So we did get a little bit of an influx and we're kind of writing that little rollercoaster, but other things to 0.2 has some good strategic project wins, great gains in our diversification as well as the fact is the industry the core true.
Additionally industry is under invested.
It's it's more than 345 years, it's even beyond that of under investment and it's catching up with them and they gotta get a hold of her ahead of it and.
They finally have profits.
They're able to deploy them Ryan today.
You've probably caught a couple of theories I missed there, but that's that's how I would quantify those.
Yeah, I think you covered the majority of it and and typically Q3 is a little bit of a stronger quarter then queue too.
Q2, we kind of have the spring break up in Canada and getting into the summer months and then the end of Q3 is Ken said, it's when things start to get colder than the more northern regions and that's when people are prepping, obviously for the cold winter season, and so forth. So.
There is a little bit of cyclicality, that's probably in there.
And then as you mentioned as well the the inventory on our side that we had a lot more inventory available.
In late Q2 in early Q3 allowed us to deliver in on that backlog a bit more but as we have also commented that backlog has continued to grow. So it's not like we've delivered a ton of product and now the backlog as much lower we've seen that replenish itself. So overall I think it's at.
That you last commented on which is that the industry is struggling to keep up.
It's been under invested for a number of years at these prices Emp's are encouraged to invest at least in an effort to try to keep up despite the other pressures that the industry is facing longer term, where they're not going in and just throwing tons of money everywhere to do a full catch up.
And a very rapid short period of time, which the supply chain right now would not allow any way. So those are some of the reasons why.
At Y Q3 was as good as it was but also continue to give us confidence that there's more of this coming that this wasn't just a bubble.
In Q3 and that things are going to come right back down we think that there's.
Macro pressures on the industry and the need that are going to continue to push this for awhile.
That's great. Thanks, that's very helpful and then looking at the current quarter.
We've got the.
Potential.
I don't want to call it has slowed down but the.
There's going to be an impact from Thanksgiving and Christmas.
And then.
So from that perspective that would be a downward pressure but.
Everything else sounds like it's moving towards.
As good a quarter in queue for is it wasn't Q3.
Excluding the holidays have have you seen that in.
In October so far has the October business been consistent with what you saw in Q3.
Right and you are on a good roll once you keep going.
Sure.
[laughter].
We've certainly seen things continue as we said our our backlog as has grown and unfortunately, we C continue to see little supply chain challenges issues here and there.
One of our suppliers had a couple a week delay in being able to deliver some product to us so.
Those things pop up but overall, we don't expect that at least those little blips are going to have a tremendous impact on the quarter, we think that.
As that product comes in we'll be able to get it shipped out.
Quickly as I mentioned, we've got the majority of all the other ancillary products available so.
We continued to deal with those challenges that we've talked about on the last several calls where new things pop up on a daily weekly basis that we have to deal with on the supply chain.
Orders have come in that we see that pipeline growing and continuing to be strong.
But as you mentioned, we do have the holidays in November and December we also experienced hunting season, which oddly enough does have an impact on our business from time to time.
Q for is always an issue and a challenge for US just in that it can either be really strong or it can be really weak and.
For example, last year, we didn't anticipate Q for being very strong but in the last couple of weeks of the quarter, we put out a ton of products. So Q4 last year was a great quarter for us.
So there are some of those unknowns that we have to deal with and that could impact the quarter, but overall, we see it continuing at about a similar pace are similar level knowing that there are some unknown coming later in the quarter.
Right and then my last question is.
And you.
Can you just aggregate the growth in revenue either year over year or a quarter over quarter about can you disaggregate that.
From price and units.
How much of the growth was driven by price increases and how much was driven by unit increases.
I don't think.
Off the top of my head and Ryan might have this I'll, let him comment.
We obviously look at those things and keeping up as Ryan mentioned with the price increases that we received from our suppliers.
The broker.
Broker market for electronics et cetera.
To keep up with that.
From the most part if we look at our system sales and projects. They are up for sure. So portion of this revenue increase is definitely from that is some of it from the increase in price.
Some of it right I don't know if you have further color you could add to that I don't really know off the top of my head the percentages.
Yeah, I don't have the percentage is either but if you are looking at quarter over quarter. There were not significant price increases implemented there were some price increases but not significant so.
Quarter over quarter that would just be all quantity increases and what we are able to deliver to our customers year over year again. The majority of it is going to be activity. We just have so much more activity going on.
Q3 of this year compared to Q3 of last year, where we were still coming out of Covid and the recovery.
At that point so.
Certainly the majority of it is activity for the industry for our customers.
And year over year, we did we did that 10% price increase late last year that we talked about and then we've done some others.
Throughout this year. So there is a portion of it that would be attributable to price, but the majority is going to be activity.
Okay.
That's it for me Thanks, a lot guys take care.
Excellent thank standings gym.
Once again, if you have a question. Please press sorry, then one.
The next question is from John Bear with Us and wealth advisor. Please go ahead.
Thank you good morning, guys depression.
Couple of questions a couple of questions here with the with the diversification effort new industries and so forth.
Can you.
Sure what percentage of those that you've had crashed I think he said roughly 60.
New projects that have.
Turn into repeat customers as opposed to say.
Say, a one off <unk>.
Project that you've worked on.
Ooh, that's a great question.
By look at just kind of looking at the project log in my mind.
I would say over half of the cut.
Customers have been repeat now.
Most of the revenue still new but.
But after you do the base.
Based on the initial project. So we still haven't even I think seeing what can happen for repeat business. It's not like we look at we talked about $1 million in the third quarter, it's not like it's from to customers. It's from quite a few and some of them are brand new projects that we finished who have already started on.
The process for new projects for the future so.
We love that it shows that they have like us it's not.
A one and done type thing we will have some of those there are some facilities that they don't have opportunities for multiple burners. For example, one food and beverage facility that we've done.
And the quarter they don't have other heaters at this facility so.
Probably not unless they expand which they've talked about.
But yeah.
I don't know the percentage off hand, Jonathan probably we should look at a little closer the business development team leaders they have it but.
Yes, it's definitely growing.
Okay.
Kind of where I always go okay sorry.
Sorry go ahead sorry.
I would just add to that that is Cam mentioned earlier in the call that sometimes it may not be the end customer that's a repeat business, but it's the group that brought us the end customer and that's who we're targeting to those Oems those engineering or construction companies, who do lots of different projects were allowed to different customers. That's.
We want to bring the repeat business just as much as the end user. So there is a little bit of difference in nuance there but.
To keep that in mind as well.
Okay. So.
When you get that type of business then do you.
Question, the OEM and say Where's this going to end.
What type of.
How large is this company in other words, they have multiple facilities where are.
Product could be.
Utilized in.
In other words forget it.
What what that what that potential for additional growth or repeat business could be.
Yeah, our our sales team wouldn't be good sales team members, if they weren't digging those types of.
For opportunities such as that and and sometimes the Oems can be a little tight lipped, but we've we've really have kind of a track record with.
We're not looking to steal their business because obviously, we're not going to get into building <unk> hydrogen reformers or other types of equipment like that and so yes, we definitely ask we look to quantify every single OEM or systems integrator.
Project and part of the way we get that is when we do the project process. When we go through an engineer and put together the package we need to know the appliance we need to know what it's doing in order to spec out the appropriate.
Inputs and outputs in order to spec out the the different types of relays. The packaging, we need to put together in terms of what this goes in from hazardous location. So all those things have to be taken into account.
So we often right from the get out we know who the end user is and we know what industry. They're in and then definitely we look to look for more opportunities. If that OEM is not going to go and get more we'll just we'll go and look for those things and you can.
Google is a great tool for us when you just look up through the end user is and what they have and where they have it.
Okay, great. Okay now.
Shifting over to supply the supply chain area.
Are you seeing any issues in the supply chain, where a particular.
Product that you need that.
That that supplier is no longer manufacturing that particular product and that that creates an issue that you have to find another supplier to to.
Make accommodate that that.
Order for that product.
In other words.
Lessons or extra Pryor, that's shutting down for whatever reason it was making a particular product for ya.
A chip or whatever.
I'll I'll have some comments and I'll turn it over to Ryan to add for their color but.
Really [laughter] do.
Do we deal with obsolescence in some components for sure is some products get older you need to deal with that but it's not normally full products. It's it's pieces and parts that go into the hole.
Product and solution itself. So that's a that's a constant thing that profile is always dealt with we always have to be looking into those things, especially for our proprietary products, we need to watch that.
More of the challenge.
That we're dealing with now is the.
The plants and the companies that make our things it's not so much that there, it's really just layers and layers down the supply chain where there's.
Where there's problems and it's not problems so much that customers have gone out of business or it's.
They are not building. These things. It's just they were not just catching up from Covid demand here.
We're catching up plants, one who are.
Depending on where they are are dealing with human power shortages and now that the world is really.
All of us use some sort of zoom or teams or blue jeans, or something before COVID-19 right to have an analogy. We all used it but we were forced into it during COVID-19 analysis normal.
Well.
Automation that type of call upon electronics and different types of things and so many industries escalated dramatically with that and it's not just now that the plants that were running just need to get enough people and then they can keep up they acted almost bring on new plants.
To keep up and that's generalizing a lot of industries, but if we look at our controllers industries for example for for our controllers and other people who are building things with microprocessors.
And different chips that go into these types of electronics, we all depend on.
A lot of the similar vendors.
For example, Texas instruments, we all rely on them well, Texas instruments, probably needs to bring online and we know they are more plants to be able to keep up with demand and they are not the only one that is just trying to play catch.
Catch up and build for the future and it's all been escalated by.
Just the greater need for.
Automation for our electronic world.
So anyway, I I hope that answered, but I will turn it over to Ryan to add any color to that you'd like.
Yes, I think you covered it really well.
Probably the only other thing I would add is that because of all the pressures that cam talked about.
We are we have struggled to be able to get the quantities that we need of various components from good reputable suppliers.
And in that effort.
Reached out and tried to go into the broker market or find additional suppliers that could supplement that in some of those have been better than others and some of those have not been good at all and the product is not has had a lot of quality issues. So there are those challenges more than just.
Companies going out of business or stopping producing a product I think it's more webcam described.
Very good thanks very much.
Thanks, John .
There are no further questions and thank you I'd like to have to call back Alright, Camryn Paypal closing remark.
Thanks, everyone for joining us on our call today to discuss our third quarter results.
We would like to thank all of you for your continued support as always we are available for any discussions or questions. You may have will be participating in the three part advisers ideas conference in Dallas later this month for more information or to register please contact three part advisors.
Thank you and have a great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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