Q4 2023 Enservco Corp Earnings Call
Good morning, and welcome to the <unk> Corporation fourth quarter and year end fiscal 2023 earnings conference call all participants will be in listen only mode should.
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I would now like to turn the conference over to Wes Harris Investor Relations for <unk> Corp. Please go ahead.
Wes Harris: Well, thanks, Gerry and Hello, everyone welcome to circa 2023 fourth quarter and full year earnings conference call presenting on behalf of the company today are rich Murphy, our executive Chairman and Mark Patterson, Our Chief Financial Officer.
Wes Harris: As a reminder, matters discussed during this call may include forward looking statements that are based on management's estimates projections and assumptions as of as of today's date and are subject to risks and uncertainties disclosed in the company's most recent 10-K as well as other filings with the SEC.
Wes Harris: The company's business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward looking statements.
Wes Harris: And <unk> assumes no obligation to update forward looking statements that become untrue because of subsequent events.
Wes Harris: I'll also point out that management's ability to respond to questions. During this call is limited by SEC regulation, FD, which prohibits selective disclosure of material non public information.
Wes Harris: This conference call also includes references to certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained or contained in today's earnings release.
Wes Harris: A webcast replay of today's call will be available after the call instructions for accessing the webcast are available in the earnings release with that I'll turn the call over to Rich Murphy Rich. Please go ahead.
Richard A. Murphy: Thanks, Wes and good morning, everyone. We appreciate you joining us for our final earnings call for fiscal 2023 and what a year. It was first we did several transactions, including myself personally to help restructure the balance sheet and place the company on stronger financial footing.
Richard A. Murphy: Allowed us to reduce our expensive Utica term debt to approximately $3 6 million as of today, a 33% decrease from the end of 2022 and a far cry from the over 34 million peak debt levels. We had in 2019 we.
Richard A. Murphy: We feel we're on the right track and we are executing on additional initiatives to promote a more stable and growing business that further shores up the balance sheet.
Richard A. Murphy: More on that later.
Richard A. Murphy: In addition to enhancing our financial position in 2023, we also took the opportunity to closely review all our operations to see where our assets will be best located from an economic perspective as a result, we shut down our North Dakota operations.
Richard A. Murphy: And the strategic move to reallocate assets to our more productive operating areas that offer more potential for revenue and profit growth.
Richard A. Murphy: It also provides the additional benefit of allowing us to convert underutilized assets to working capital to fund the heating season activities.
Richard A. Murphy: The continued focus on deleveraging the balance sheet and improving market share and margins in the basins in which we operate has enabled us to begin the growth phase of the company turnaround. This.
Richard A. Murphy: This is best exemplified by the recent buckshot announce it.
I believe this is a great first step in transitioning the company towards a more consistent cash flow generator.
Richard A. Murphy: The focus of our current operations has been on improving the pricing environment and gaining market share in the three basins we operate.
Richard A. Murphy: This focus resulted in a 14% increase in quarterly gross profit margin and a 61% increase in annual gross profit margins.
Richard A. Murphy: We continue to focus on ways to improve margins and deliberate consistent profitability as I said on our last earnings call. We believe we can continue to capture additional market share across our entire operating footprint.
Richard A. Murphy: We feel we have a solid management team in place that continue to execute on all of our strategic plan to transform the business and.
Richard A. Murphy: And finally.
Our efforts to expand our customer base further rationalize location of our assets to enhance profitability and drive increased efficiencies throughout the business is beginning to show in our financials.
Richard A. Murphy: Our profit margins continue to improve our gene G&A expenses continue to decrease on a comparative basis and our adjusted EBITDA loss continues to decrease and this is a direct result of our focused execution on our multifaceted plan to optimize our operations and build a more sustainable business model with reduced debt.
Richard A. Murphy: So with that I'm going to have Mark take you through some of the quarterly and full year numbers before I provide a few closing comments.
Richard A. Murphy: Mark.
Mark K. Patterson: Thank you rich.
Mark K. Patterson: Our fourth quarter 2023 heating season saw about 13 per se your cold days, which primarily impacted completion services.
Mark K. Patterson: Our frac water water heating segment was a little softer than we had hoped that the launch of the season, but it would still probably up year over year.
Our hot Oiling operations saw some weakness in demand as well due to several factors.
Mark K. Patterson: The result was fourth quarter 2023 revenue of about $6 5 million that was flat with the fourth quarter of 2022.
Mark K. Patterson: On a segment basis production services revenue was lower at $2 2 million compared to 2.6 million a year ago.
Fourth quarter 2023 completion services revenue.
Mark K. Patterson: 10% to $4 3 million from $3 9 million in 2022, mostly driven by strong growth in our Colorado operation.
Mark K. Patterson: The fourth quarter adjusted EBITDA came in at 62001.
Oh boy.
Mark K. Patterson:
None: Yeah. It was it was the adjusted EBITDA loss compared to address that you'd got law.
None: In the fourth quarter 2022.
None: 77000.
None: My apology that with a positive EBITDA.
None: In the fourth quarter of this year compared to an EBITDA loss of last year, which was 181% improvement.
None: Net loss in the fourth quarter was one 9 million or seven Pittsburgh diluted share versus a net loss of one 7 million or 14 per diluted share in the same quarter of last year.
None: Turning to our full year results I think rich summed up nicely. The many initiatives that we executed during 2023 with the result being this is Dan.
None: What crude but reducing our adjusted EBITDA loss.
None: Let's go through some of the details.
None: For your 2023 revenue increased 2% year over year to $22 1 million from 41 6 million.
None: 42.
The increase was attributable to growth in the completion services segment, which increased 11% year over year to $11 5 million.
None: <unk>, four 4 million and more than offset by 6% and more than offset a 6% decline in production services, which were 10 5 million versus what what to make it year over year.
None: The company's revenues generated from completions activity.
None: Strong during the fourth quarter 2023.
None: Which in addition to increased volume benefit.
None: Limitation of price increases for these services.
None: Most notably in our Colorado region.
None: Well year over year increases to our completions activity revenues were largely offset by decreases in our production services segment revenue.
None: I know revenue and demand for production services continued to be strong in 2023.
None: Total segment profit for 2023 increased 61% to $2 3 million from $1 4 million in waiting to 2022.
None: For the reasons I just discussed coupled with our continued efforts to reduce our labor costs and downtime during the off season month.
None: Again, most notably at our Colorado region.
None: Full year 2023, we posted an adjusted EBITDA loss.
None: One 5 million, which was a 46% improvement from the 2.7 million adjusted EBITDA loss.
None: Posted in 2022, along with higher total segment profit.
None: We benefited from a 9% decrease in G&A, primarily due to reductions in personnel expenses.
None: Stock based compensation costs year over year.
None: Full year 2023 net loss.
None: It was $8 5 million or 42 cents per basic share.
None: Versus net loss of five 6 million or 48.
None: Basic and diluted share in 2022.
None: As a reminder, our 2022 that long.
None: Noncash $4 3 million gain on debt extinguishment without this change.
None: Our net loss decreased one 4 million year over year.
None: We remain very focused on right sizing our business.
None: You look for.
None: And to execute on ways to reduce our cost across the business.
None: We've seen significant declines in our history and experience over the past two years.
None: We're getting closer to our internal goal.
None: Oh run rate of three six megawatts.
None: Excluding some one time legal and noncash items.
None: Stock compensation expense.
None: Turning to the balance sheet as rich discussed.
None: During 2023, we've made material progress in reducing our debt levels echoing.
None: Echoing your comments remain we remain squarely focused on improving the financial position of the company.
None: Executing on the opportunities that not only enhances our balance sheet, but also provide incremental growth opportunities.
None: I expect rates will talk further about these efforts in its clothing market.
None: I'll turn the call back over to rich.
None: Okay.
Richard A. Murphy: Thank you Mark.
Right I do plan to discuss a very exciting opportunity in front of us, but before I do that I will spend a little time discussing the outlook of our existing businesses.
Richard A. Murphy: The strategic actions, we took in 'twenty three at places in a much better position as we move into 'twenty four as I said in my opening comments.
Richard A. Murphy: Seeing material financial improvements across the board, including in profit margins reductions to G&A expense and decreases on our adjusted EBITDA loss, we're studying steadily building momentum across our businesses are encouraged by the continued drilling activity.
Richard A. Murphy: Operating areas.
Richard A. Murphy: Based on customer feedback, we expect further demand growth for our services and believe we are well positioned to meet that demand.
Richard A. Murphy: That said our current heating business is very dependent on cold weather as you know Unfortunately, we can't count on weather always been a liking so over the past month, we've been evaluating opportunities to add in non seasonal business with greater growth potential and synergies to our current service offerings.
Richard A. Murphy: On March 20th we announced what we expect will be a transformative transaction for our shareholders. We have reached an agreement to acquire buckshot trucking LLC or what I'll refer to as just Buck shot.
Richard A. Murphy: I won't get into all the details today as you can get them from the press release, we put out on here are some highlights with a focus on the strategic rationale for the transaction.
Richard A. Murphy: Who has bought shop there.
They were founded in 2017 and headquartered in Fort Lupton, Colorado, They're greater Rocky Mountain focus it's complemented by an extensive cousin of operations in Wyoming, and Utah, and North Dakota and Texas.
Richard A. Murphy: By key base of operations in Casper, Wyoming Buckshot focuses on hot oil hotshot trucking dedicated freight services and L. T L or lessened truckload services within the oil and gas sector.
None: More important why shouldn't circle acquired buckshot there are many reasons, but here are a few of the main ones.
None: Allows us to enter the higher margin energy logistics services space without a business with a business that has historically generated strong growth and cash generation without substantial new overhead.
None: It provides a year round perspective growth with the operational and financial visibility.
None: It also provides incremental services for our existing and expanded customer base, while providing a pathway for a range of cash flow growth and improved predictability and finally, it creates a new operating system that complements and expands current strong for our current strong market position in hot Oiling services and Frac water heating in addition to some non oil and.
None: Natural gas customers.
None: Shortly buckshot founder and current owners Tony Jim They will continue to leap up shot and are financially incentivized to oversee and grow the business through an earn out provision that's part of the transaction.
None: As important they are bringing their operating team with them.
None: In short Buckshot provides a strong complement to our current service offerings with the added benefit.
And ended up not being winter weather dependent buckshot will also provide a substantial improvement in operational and financial visibility, which benefits our businesses our business shareholders and other stakeholders, we are targeting to close the transaction in the second quarter of this year.
To sum up 2023.
None: To sum up 2020 with a much improved year for himself go with a full year and passing a late third quarter 2023 additional wrap it hot and the potential addition of pop shop. We believe we're solidly position Street and you get a better 'twenty 'twenty four P M.
None: One quick comment on the stock price as the largest shareholder I have been focused on building a sustainable business model that can generate consistent cash flows.
Stock prices ultimately reflect the copies future discounted cash flows with an improved balance sheet stronger operating business, but shot upshot acquisition pending and the most optimistic about our future since taking over in late 2020.
None: With that.
Teamed up with Al Petrie group, a highly regarded IR pump to enhance our future shareholder communications.
None: With that thanks again for joining us on the call today, we will now be happy to take any questions.
None:
None: Excuse me, we will now begin the question and answer session.
None: To ask a question you May press Star then one on your telephone keypad if.
None: If you were using a speakerphone please pick up your handset before pressing the keys.
None: To withdraw your question. Please press Star then two after.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Jeff Grant with Alliance Global Partners. Please go ahead.
Jeffrey Scott Grampp: Good morning, guys.
Jeffrey Scott Grampp: I first wanted to good morning wanted to talk first on the production services front it looks like a really strong Florida there on the margin front in particular.
Jeffrey Scott Grampp: Hoping to dive into that a bit more and maybe looking forward prospectively into 'twenty for what kind of confidence you guys may have.
Generation of that kind of margin profile.
Jeffrey Scott Grampp: Yeah.
None: Okay right out of the gate.
Pricing has has increased and were getting more on standby rates.
None: Obviously weather was a bit of a headwind, but because of the standby rates and the reality is since 2000 Twenty's comps.
None: Competition, a lot of the countries like I said before has.
None: And he's a consolidator going away because the business was so tough so.
None: We have definitely seen the impact of higher rates.
None: Better standby rates.
None: And or.
None: Just a more rationalized market marketplace.
And we expect that to continue Jeff I think I don't think it's going to go back you know unless you see.
So cost of your oil price decline or sometimes the economics get but I would I would think that this kind of a marketplace.
None: The pervasive to 'twenty four.
None: Understood. Thank you and and maybe building on that you guys had a press release last month talking about revenue being up 15% in the first couple months of Q1.
None: Can you guys kind of talk about the main drivers there I mean, I know whether it wasn't a tremendous friend and driving that so I assume it's more just kind of been serco specific market share gains or pricing.
Just hoping to better understand that dynamic.
Yeah, I mean I think it's.
None: In our remarks with a rapid hot deal, Pennsylvania is much improved.
None: A much more improved pricing format in first quarters that helped our Colorado.
None: Is it better pricing or margin I'm, sorry, that's obviously helped and offset any type of weather impact. We've had so I would say you know the combination of stronger Pennsylvania.
None: Basically stronger, Colorado, which is.
None: We have a little activity in Wyoming, but that's basically our two basins at this point for heating which.
None: Which is production.
None: Okay, Great and I keep telling me up here for my next question I had so on rapid heart I mean, I know a lot of our focus is on as Unbox out here given that that's obviously a big deal for you guys, but I don't want to lose too much sign of that that deal as well or just kind of curious if you can update us on the on the performance and integration there.
None: And maybe just if you're seeing any change in the competitive dynamics given that it was fairly.
None: Fairly meaningful acquisition from a competitive standpoint and in Appalachia.
None: Yeah, I mean, it's.
None: The integration is complete and with.
None: The integration went very nicely.
None: Hi, guys, it's right in the yard now have done a tremendous job.
None: The you know.
None: Is that the pricing in the Marcellus has always been better than it is out west but you also have a shorter season. So the key to wanting to be in that basin for a long term, it's a standby rates and we've done a really good job on.
None: The.
None: This new team has done a very good job on standby rates.
None: That being said you know you know that gas prices are so.
None: We did have some headwinds in Pennsylvania with regard to whether this this winter but.
None: Again, the standby rates were very helpful in that aspect.
None: A pleasant surprise.
None: Yeah.
None: Okay.
None: The details rich. Thank you guys for the time.
None: Jeff.
None: Again, if you have a question. Please press Star then one please standby as we poll for questions.
None: Yeah.
None: Okay.
None: Yeah.
None: Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to rich Murphy for any closing remarks.
Richard A. Murphy: I just want to say, thank you to everybody our employees shareholders. It's it's been a long road I think we're good with the Buck shot and wrap it out as I said in our remarks, where we're looking at a nice 'twenty 'twenty four and four so we will be communicating more with yeah Pizza group and look forward to catching up with some of our shareholder space.
In 'twenty four and with that are you.
Richard A. Murphy: Enjoy the rest of the spring and talking a few weeks.
Richard A. Murphy: Thanks.
None: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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