Q1 2024 Profire Energy Inc Earnings Call

Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Profire Energy's first quarter 2024 earnings call. I will now turn the call over to Steven Hooser, Investor Relations, to get the call started. Thank you.

Good afternoon, everyone and thank you for participating in today's conference call to discuss profile right now just the first quarter 'twenty 'twenty four earnings call.

I'll now turn the call over to Steven Hooser Investor Relations to get the coal stocks at thank you.

Steven Hooser: Thank you, Operator. With me on the call today is Ryan Oviatt, Co-CEO and CFO of Profire Energy, and Cameron Tidball. Yesterday, after the market closed, the company 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 investors section of the company's website.

Steven Hooser: Thank you operator with me on the call today is co CEO and CFO of Pro fire Energy, Ryan Obs and co CEO Cameron Tidball yesterday after the market closed the company filed its Form 10-Q with the SEC.

Steven Hooser: And discussed the quarter's highlights in a press release.

Steven Hooser: As always both of those documents are available on the investors section of the company's website.

Steven Hooser: A transcript of this call will also be posted in the coming days. Before we begin today's call, I would like to take a moment to read the company's safe harbor state. Statements made during this call that are not historical are forward-looking statements. These statements include but are not limited to statements regarding the company's expected growth, revenue diversification success, the planned research and development of new products, future projects, future performance in new and existing markets, sales pipeline, potential M&A opportunities, and the company's future financial performance.

Steven Hooser: Transcript of this call will also be posted in 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 that are not historical are forward looking statements. This call contains forward looking statements, including but not limited to statements regarding the company's expected growth revenue diversification success.

Steven Hooser: 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 statement. Factors that could materially affect such forward-looking statements include certain economic, business, public market, and regulatory risk factors identified in the company's periodic reports filed with the Securities and Exchange Commission.

Steven Hooser: The planned research and development of new products future projects future performance in new and existing markets sales pipeline potential M&A opportunity opportunities and the company's future financial performance.

Steven Hooser: 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.

Steven Hooser: Could materially affect such forward looking statements include certain economic business public market and regulatory risk factors identified in the company's periodic reports filed with the Securities and Exchange Commission all.

Steven Hooser: All forward-looking statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are made only as of the date of the release, and the company assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances except as required by law. Readers should not place undue reliance on these forward-looking statements.

Steven Hooser: All forward looking statements are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

Steven Hooser: All forward looking statements are made only as of the date of the release and the company assumes no obligation to update forward looking statements to reflect subsequent events or circumstances, except as required by law readers should not place undue reliance on these forward looking statements I would like to remind everyone that this call is being recorded and will be available for replay through may 23rd.

Steven Hooser: I would like to remind everyone that this call is being recorded and will be available for replay through May 23rd, 2024, starting later today. It will be accessible via the link provided in yesterday's press release, as well as the company's website at www.profireenergy.com. Following the remarks by Mr. Oviatt and Mr. Tidball, we will open up the call for your questions. Now, I'd like to turn the call over to our co-CEO and CFO of Profire Energy, Mr. Ryan Oviatt. Ryan? Thank you.

Steven Hooser: 2024.

Steven Hooser: Starting later today it.

Steven Hooser: It will be accessible via the link provided in yesterday's press release as well as the company's website at Www Dot profile energy Dot com.

Steven Hooser: Following the remarks by Mr. Albeit in Mr. Tidball, we will open up the call for your questions now I'd like to turn the call over to our co CEO and CFO of profile of energy, Mr. Ryan, albeit Ryan.

Ryan W. Oviatt: Thank you, Steven, and welcome to all of you who are joining us on the call today. Our first quarter results reflect the underlying strength of our legacy business and continued traction with our diversification efforts. Our year-over-year revenue performance declined as we lapped our third-best quarterly revenue in company history and saw several significant projects deferred by customers into subsequent periods. However, in our view, the near and long-term trends for our legacy business remain highly favorable.

Ryan W. Oviatt: Thank you Steven and welcome to all of you who are joining us on the call today.

Ryan W. Oviatt: Our first quarter results reflect the underlying strength of our legacy business and continued traction with our diversification efforts.

Ryan W. Oviatt: Our year over year revenue performance declined as we lapped our third best quarterly revenue in company history and saw several significant projects deferred by customers into subsequent periods.

Ryan W. Oviatt: In our view, the near and long term trends for our legacy business remain highly favorable.

Ryan W. Oviatt: EMP companies continue to play catch-up on multi-year deferred maintenance and automation investments. However, we believe hydrocarbons will continue to play a vital role in global energy production as alternative energy sources will not be fully capable of shouldering the demand load for the foreseeable future. The Biden administration's January announcement to pause pending and future permits for LNG exports has slowed some industry capital expenditure decisions in recent months and even influenced many natural gas producers to shut off production at existing wells due to the associated drop in natural gas prices.

Ryan W. Oviatt: MP companies continue to play catch up on multiyear deferred maintenance and automation investments.

Ryan W. Oviatt: We believe hydrocarbons will continue to play a vital role in global energy production as alternative energy sources will not be fully capable of shouldering the demand load for the foreseeable future.

Ryan W. Oviatt: The Biden administrations January announcement to pause pending and future permits for LNG exports has slowed some industry capital expenditure decisions in recent months and even influenced many natural gas producers to shut off production at existing wells due to the associated drop in natural gas prices.

Ryan W. Oviatt: However, we believe LNG continues to be a key long-term solution for global energy and that North American producers are well positioned to capitalize on this opportunity. As they do so, Profire will continue to be a critical supplier of automation and safety controls for their production infrastructure.

Ryan W. Oviatt: However, we believe LNG continues to be a key long term solution for global energy.

Ryan W. Oviatt: And that North American producers are well positioned to capitalize on this opportunity.

Ryan W. Oviatt: As they do so profile will continue to be a critical supplier of automation and safety controls for their production infrastructure.

Ryan W. Oviatt: The IEA forecasts energy demand to increase by 3.5% over the next three years versus the low to mid 2% growth rates achieved in 2022 and 2023. This growth will be primarily driven by an increase in overall electrification of world economies, including the massive energy demand increase being required for AI data centers. Morgan Stanley recently predicted that the power demand from generative AI will increase at an annual average of 70% through 2027. These trends and predictions support our belief that we need more of all energy sources, including the ever-abundant and reliable fossil fuels.

Ryan W. Oviatt: The IEA forecast energy demand to increase by three 5% over the next three years versus the low to mid 2% growth rates achieved in 2022 and 2023.

Ryan W. Oviatt: This growth will be primarily driven by an increase in overall electric vacation of world economies, including the massive energy demand increase being required for AI data centers.

Ryan W. Oviatt: Morgan Stanley recently predicted that the power demand from generative AI will increase at an annual average of 70% through 2027.

Ryan W. Oviatt: These trends and predictions support our belief that we need more of all energy sources, including the ever abundant and reliable fossil fuels.

Ryan W. Oviatt: Oil prices rose steadily during the quarter and remain above $80 per barrel, partially driven by supply cuts by OPEC and the ongoing civil unrest in the Middle East. Recent events have not led to meaningful supply disruptions, but any further escalation and or broader conflict could have a significant impact on commodity prices and lead to the need for increased North American production. As we have stated previously, we remain very optimistic about Profire's medium and long-term prospects, despite short-term fluctuations in quarterly performance.

Ryan W. Oviatt: Oil prices rose steadily during the quarter and remained above $80 per barrel, partially driven by supply cuts by OPEC and the ongoing civil unrest in the middle East.

Ryan W. Oviatt: Recent events have not led to meaningful supply disruptions, but any further escalation <unk> broader conflict.

Ryan W. Oviatt: Would have a significant impact on commodity prices and lead to the need for increased North American production.

Ryan W. Oviatt: As we have stated previously we remain very optimistic about pro fires medium and long term prospects. Despite short term fluctuations in quarterly performance.

Ryan W. Oviatt: We believe 2024 will be another strong year for the company with higher revenues and income in the second half of the year. Our strong financial position continues to allow us to evaluate new investment and acquisition opportunities as we move forward with our strategic growth objectives.

Ryan W. Oviatt: We believe 2024 will be another strong year for the company with higher revenues and income in the second half of the year.

Ryan W. Oviatt: Our strong financial position continues to allow us to evaluate new investment and acquisition opportunities as we move forward with our strategic growth objectives.

Ryan W. Oviatt: With that, let me turn my remarks to Profire's financial results for the first quarter of 2024. During the first quarter, we recognized approximately $13.6 million in revenue compared to $14.5 million in the fourth quarter and $14.7 million in the prior year. Gross profit for the first quarter was $6.8 million compared to $7.8 million in the prior quarter and $7.8 million in the first quarter of 2023. Gross margin was 50% of revenues compared to 54% in the prior quarter and 53% in the first quarter of 2023.

Speaker Change: With that let me turn my remarks to profile our financial results for the first quarter of 2024.

Ryan W. Oviatt: The sequential and year-over-year decrease was primarily related to product mix, normal inventory and warranty reserve movements, inflation, and the impact lower revenue has on fixed cost coverage within cost of goods sold. Total operating expenses for the first quarter were approximately $5 million, or 37% of revenue compared to $5 million or 35% of revenue in the fourth quarter and $4.5 million or 31% of revenue in the year-ago quarter. The year-over-year increase reflects the impact of inflation and additional headcount in support of strategic growth and increased business activity.

Speaker Change: During the first quarter, we recognized approximately $13 6 million in revenue compared to $14 5 million in the fourth quarter and $14 7 million in the prior year quarter.

Speaker Change: Gross profit for the first quarter was $6 8 million compared to $7 8 million in the prior quarter and $7 8 million in the first quarter of 2023.

Speaker Change: Gross margin was 50% of revenues compared to 54% in the prior quarter and 53% in the first quarter of 2023.

Speaker Change: The sequential and year over year decrease was primarily related to product mix normal inventory and warranty reserve movements inflation and the impact of lower revenue has on fixed cost coverage within cost of goods sold.

Speaker Change: Total operating expenses for the first quarter were approximately $5 million or 37% of revenue compared to $5 million or 35% of revenue in the fourth quarter, and $4 5 million or 31% of revenue in the year ago quarter.

Speaker Change: The year over year increase reflects the impact of inflation and additional head count in support of strategic growth and increased business activity.

Ryan W. Oviatt: Profire's 10-year annual weighted average operating cost as a percent of revenue is 40%, which compared to the performance of the periods noted here indicates that despite inflation challenges, we continue to operate our business in an effective and scalable fashion consistent with growth in activity. Net income for the first quarter was approximately $1.4 million, or $0.03 per diluted share. This compares to net income of $2.6 million, or $0.05 per diluted share, in the first quarter of 2023 and net income of $3.3 million, or $0.07 per diluted share, in the fourth quarter of last year.

Speaker Change: <unk> 10 year annual weighted average operating cost as a percent of revenue was 40%, which compared to the performance of the periods noted here indicates that despite inflation challenges. We continue to operate our business in an effective and scalable fashion consistent with growth in activity.

Speaker Change: Net income for the first quarter was approximately $1 4 million or <unk> <unk> per diluted share. This compares to net income of $2 6 million or <unk> <unk> per diluted share in the first quarter of 2023, and net income of $3 3 million or <unk> <unk> per diluted share in the fourth quarter of last year.

Ryan W. Oviatt: As noted on our last earnings call, the lower performance of the current quarter is in large part due to the past several years benefiting significantly from our tax planning efforts regarding deferred taxes, net operating losses in our Canadian subsidiary, and employee retention credits in the U.S. Without these efforts, performance in the comparable periods would have been reduced.

Speaker Change: As noted on our last earnings call the lower performance of the current quarter is in large part due to the past several years benefiting significantly from our tax planning efforts regarding deferred taxes net operating losses in our Canadian subsidiary and employee retention credits in the U S without.

Speaker Change: These efforts performance in the comparable periods would have been reduced.

Ryan W. Oviatt: Cash used in operations in the first quarter was approximately $2.7 million compared to cash generated of approximately $522,000 in the prior year quarter. This difference was largely driven by lower net income in the current quarter and necessary increases in inventory, as well as reductions in accrued liabilities. Our inventory balance at the end of the quarter was approximately $15.7 million, compared to $14.1 million at the end of the fourth quarter. We ended the quarter with $16.2 million in cash and liquid investments and remained debt-free. I will now turn the call over to Cam to provide an overview of our business. Thank you.

Speaker Change: Cash used in operations in the first quarter was approximately $2 7 million compared to cash generated of approximately 522000 in the prior year quarter. This difference was largely driven by the lower net income in the current quarter and necessary increases in inventory as well as reductions in accrued liabilities.

Speaker Change: <unk>.

Speaker Change: Our inventory balance at the end of the quarter was approximately $15 7 million compared to $14 1 million at the end of the fourth quarter.

Speaker Change: We ended the quarter with $16 2 million in cash and liquid investments and remained debt free.

Speaker Change: I will now turn the call over to Cam to provide an overview of our business Ken.

Cam: Thank you Brian.

Cameron M. Tidball: As we reflect on our Q1 performance, top line revenue matched our internal expectations, and overall, we are pleased with the results of the quarter. We are excited to report the achievement of our two strongest sequential quarters in company history related to the total value of sales orders received. Challenging Factors Facing Our Traditional Upstream Business included the warmest winter season on record for the contiguous United States and Canada, reduced drilling and completion activity, and lower natural gas commodity prices, resulting in production shut-ins in core gas fields. The industry was also impacted by the over $230 billion spent on mergers and acquisitions from Crude Oil and Natural Gas Exploration and Production Company.

Cam: As we reflect on our Q1 performance topline revenue matched our internal expectations and overall, we are pleased with the results of the quarter. We are excited to report the achievement of our two strongest sequential quarters in company history.

Cam: <unk> to total value of sales orders received.

Cam: Challenging factors facing our traditional upstream business included the warmest winter season on record for the contiguous United States, and Canada reduced drilling and completion activity and lower natural gas commodity prices, resulting in production shut ins in core gas plays.

Cam: The industry was also impacted by the over $230 billion spend on mergers and acquisitions from crude oil and natural gas exploration and production companies.

Cameron M. Tidball: Despite these factors, we were able to achieve strong top-line revenue and financial metrics ranking amongst our best historically. The Profire team continues to exemplify our core values and focus on providing performance-driven products and solutions to the energy sector. We remain committed to supporting our customers' goals of reducing emissions, improving workplace safety, and optimizing operations through the integration of our proven technology, which provides vital control and automation of their thermal processes and applications.

Cameron M. Tidball: Despite these factors we were able to achieve strong top line revenue and financial metrics ranking amongst our best historically.

Cameron M. Tidball: The profile our team continues to exemplify our core values and focus on providing performance driven products and solutions to the energy sector.

Cameron M. Tidball: We remain committed to supporting our customers' goals of reducing emissions, improving workplace safety and optimizing operations through the integration of our proven technology, which provides vital control and automation of their thermal processes and applications.

Cameron M. Tidball: In Q1, we were able to deliver strong combined diversification results, nearly doubling our 2023 Q1 diversified revenue, which is non-oil and gas and industrial revenue nearly tripled compared to the first quarter of 2023. These results are encouraging as we continue to obtain repeat business and find new customers and projects. Our Q1 diversification results were derived from industries including critical energy infrastructure, landfill, biogas, biofuel operations, refining, power generation, and mining. We continue to find new and exciting applications where Profire burner and combustion management technology and expertise can be leveraged.

Cameron M. Tidball: In Q1, we were able to deliver strong combined diversification results nearly doubling our 2023 Q1 diversified revenue.

Cameron M. Tidball: Our non oil and gas and industrial revenue nearly tripled compared to the first quarter of 2023.

Cameron M. Tidball: These results are encouraging as we continue to obtain repeat business and find new customers and projects.

Cameron M. Tidball: Our Q1 diversification results were derived from industries, including critical energy infrastructure landfill biogas biofuel operations refining power generation and mining.

Cameron M. Tidball: We continue to find new and exciting applications, where profile burner in combustion management technology and expertise can be leveraged.

Cameron M. Tidball: In the first quarter, we were able to win some exciting new diversification projects which have the potential to lead to future repeat business. Of note, we were awarded our first project with a leading clean tech and environmental services firm who develops advanced waste-to-energy solutions, integrating Profire burner and combustion management with their proprietary high-temperature pyrolysis technology. Through our combined solution, woody materials and organic waste can be transformed into renewable natural gas, green hydrogen, and syngas, as well as valuable biocarbon outputs including biochar or activated biochar, which is a highly useful filtration medium.

Cameron M. Tidball: In the first quarter, we were able to win some exciting new diversification projects, which have the potential to lead to future repeat business.

Cameron M. Tidball: Of note we were awarded our first project with a leading clean tech and environmental services firm, who developed advanced waste to energy solutions integrating profile burner in combustion management to their proprietary high temperature pyrolysis technology.

Cameron M. Tidball: Through our combined solution Woody materials, and organic waste can be transformed into renewable natural gas green hydrogen syngas as well as valuable biochar been outputs, including bio char or activated by <unk>, which is a highly useful filtration media.

Cameron M. Tidball: We believe that we will be able to leverage this opportunity to work with other firms who occupy this space. In the quarter, we were also awarded our third project with an industry-leading biofuel producer. Profire products and solutions match the control needs of this innovator, who transforms solid waste into renewable natural gas which can be used for transportation.

Cameron M. Tidball: We believe that we will be able to leverage this opportunity to work with other firms who occupy the space.

Cameron M. Tidball: In the quarter. We were also awarded our third project with an industry, leading biofuel producer.

Cameron M. Tidball: Profile products and solutions matched the control needs of this innovator, who transformed solid waste into renewable natural gas, which can be used for transportation.

Cameron M. Tidball: We plan to execute on each of these projects in 2024. In the first quarter, we continued to develop our relationship with a leading OEM who develops direct-fired heaters used in a variety of processing plants and petrochemical and refining facilities. As a new customer to Profire in 2023, we are pleased to earn this repeat business as it represents trust in our engineering process and performance of our product. These wins represent a small sample of the progress we are making towards our diversification goals.

Cameron M. Tidball: We plan to execute on each of these projects in 2024.

Cameron M. Tidball: In the first quarter, we continued to develop our relationship with a leading OEM, who developed direct fired heaters used in a variety of processing plants and petrochemical and refining facilities.

Cameron M. Tidball: As a new customer to profile in 2023, we're pleased to earn this repeat business as it represents trust and our engineering process and performance of our products.

Cameron M. Tidball: These wins represent a small sample of the progress, we're making towards our diversification goals, our sales pipeline and current backlog and critical energy infrastructure have us on pace to exceed 2020 threes results in this area of the energy sector are non oil and gas and industrial project pipeline current.

Cameron M. Tidball: Our sales pipeline and current backlog in critical energy infrastructure have us on pace to exceed 2023's results in this area of the energy sector. Our non-oil and gas and industrial project pipeline, current sales orders, and bid opportunities have us on track to exceed our record-breaking diversification results in 2023. We remain committed to our strategy. We continue to develop our internal teams and individuals, enabling them to provide a customer experience in line with our vision and mission.

Cameron M. Tidball: Sales orders and bid opportunities have us on track to exceed our record breaking diversification results of 2023.

Cameron M. Tidball: We remain committed to our strategy, we continued to develop our internal teams and individuals enabling them to provide a customer experience in line with our vision and mission <unk>.

Cameron M. Tidball: Future product development is being shaped by our learnings as we gain insights into new industries and applications we intend to support in the future. As mentioned previously, we feel several factors have impacted our ability to deliver results at or exceeding the levels experienced throughout 2023. Warm winter temperatures, attributed to an El Nino year, impacted natural gas commodity prices as storage was high, and although feedstock demand for LNG remained robust, many producers were forced to shut down production, which in turn impacted drilling and completion activities.

Cameron M. Tidball: Future product development is being shaped by our learnings as we gain insights into new industries and applications, we intend to support in the future.

Cameron M. Tidball: As mentioned previously we feel several factors impacted our ability to deliver results at or exceeding the levels experienced throughout 2023 warm winter temperatures attributed to an el Nino year impacted natural gas commodity prices as storage is high and although feedstock demand for LNG remained robust.

Cameron M. Tidball: Many producers were forced to shut in production, which in turn impacted drilling and completion activity.

Cameron M. Tidball: The record-breaking M&A activity of 2023 slowed project discussions as integration developments impact our customers and their ability to execute purchase orders and make normal operational decisions. Mergers also lead to new contacts, new processes, and new software to navigate as part of engineering, procurement, and invoicing. We feel that the acquisitions that have occurred will be overall positive for Profire, but may have some short-term impact or delays as they navigate their integration project.

Cameron M. Tidball: The record breaking M&A activity of 2023 slowed project discussions as integration developments impact our customers and their ability to execute purchase orders and make normal operational decision.

Cameron M. Tidball: Mergers also lead to new context, new processes, and new software to navigate as part of engineering procurement and invoicing.

Cameron M. Tidball: We feel that the acquisitions that have occurred will overall be positive for profile. However may have some short term impact or delays as they navigate their integration projects.

Cameron M. Tidball: As we continue to monitor the health of the energy sector related to hydrocarbon production, demand continues to be strong and is outperforming the narrative generated by the IEA. The ideological battle between OPEC and the IEA regarding global demand for hydrocarbons is currently trending towards OPEC's analysis.

Cameron M. Tidball: As we continue to monitor the health of the energy sector related to hydrocarbon production demand continues to be strong and is outperforming the narrative generated by the IEA.

Cameron M. Tidball: The ideological battle between OPEC and the IEA regarding global demand for hydrocarbons are trending towards Opex analysis currently.

Cameron M. Tidball: In 2023, the US achieved strong growth and record-setting production levels, adding over a million barrels per day. Consensus remains the US will again achieve production growth in 2024, however, not at the same percentage increase as in 2023. We continue to see EMPs remain disciplined with respect to their capital allocation program. With an average WTI price of $77.50 in Q1, we believe that the current commodity price lies within the price band, which includes a break-even point, as well as a healthy return to shareholders.

Cameron M. Tidball: In 2023, the U S achieved strong growth and record setting production levels, adding over 1 million barrels per day.

Cameron M. Tidball: Consensus remains that the U S will again achieve production growth in 2024, however, not to the same percentage increase of 2023.

Cameron M. Tidball: We continue to see E&ps remain disciplined with respect to their capital allocation programs with an average W. Ti price of $77 50 in Q1, we believe that the current commodity pricing.

Cameron M. Tidball: Lies within the price band, which includes a breakeven point as well as a healthy return to shareholders.

Cameron M. Tidball: No breakeven points in shale economics have remained relatively stable for the last four to five years, we have seen a change in the business model. In addition to returning the cost of capital. The New model includes a return to shareholders at current prices. We believe we will not see a dramatic increase in rig activity. However that it will.

Cameron M. Tidball: Though break-even points and shale economics have remained relatively stable for the last four to five years, we have seen a change in the business model. In addition to returning the cost of capital, the new model includes a return to shareholders.

Cameron M. Tidball: At current prices, we believe we will not see a dramatic increase in rig activity, but it will remain stable. We continue to work with U.S. and Canadian majors in independent drilling. Our products continue to support initiatives to help meet QUADO standards, EPA, and carbon tax legislation impacting the energy sector. Profire's solutions and service offerings are specified by best-in-class operators including EQT, Chesapeake, Chevron, Conoco, Southwestern Energy, Vital, CNRL, Synovus, and many others. We support these customers directly or through our numerous valued partners in OEM.

Cameron M. Tidball: Remained stable.

Cameron M. Tidball: We continue to work with U S and Canadian majors and independents.

Cameron M. Tidball: Our products continue to support initiatives to help meet Quad O standards, EPA and carbon tax legislation impacting the energy sector.

Cameron M. Tidball: Fire solutions and service offerings are specified by best in class operators, including EQT, Chesapeake Chevron Conoco southwestern energy vital CNR rail synovus and many others.

Cameron M. Tidball: We support these customers directly or through our numerous valued partners and Oems.

Cameron M. Tidball: We reaffirm that to meet the world's growing demand for energy, North American produced hydrocarbons are essential and that they have the potential to be the cleanest, most reliable, most ethically produced, and affordable means to meet expected growth and demand. We believe that North American producers have and are making incredible improvements to reduce GHG emissions. Profire continues to support and be part of this movement and cause. We continue to develop products and solutions for our current traditional markets, as well as in support of our diversification efforts.

Cameron M. Tidball: We reaffirm that to meet the world's growing demand for energy North American produced hydrocarbons are essential and that they have the potential to be the cleanest and most reliable most ethically produced an affordable means to meet expected growth in demand.

Cameron M. Tidball: We believe that North American producers have and are making incredible improvements to reducing ghd emissions.

Cameron M. Tidball: Profile continues to support and be part of this movement and cause.

Cameron M. Tidball: We continue to develop products and solutions for our current traditional markets as well in support of our diversification efforts are.

Cameron M. Tidball: Our research and development team has recently been invited to work with a major global EMP on a project that has the potential to evolve the production of oil in the Permian Basin. Though preliminary, we are confident that we can provide value to the project and see future opportunities to collaborate and develop solutions to reduce emissions. Our balanced approach to short, mid, and long-term product development remains intact. Our focus on M&A activity continues as we follow a methodical process for finding and analyzing opportunities.

Cameron M. Tidball: Our research and development team has recently been invited to work with a major global E&P on a project that has the potential to evolve the production of oil in the Permian Basin.

Cameron M. Tidball: Though preliminary we are confident that we can provide value to the project and see future opportunities to collaborate and develop solutions to reduce emissions.

Cameron M. Tidball: Our balanced approach to short mid and long term product development remains intact.

Cameron M. Tidball: Our focus on M&A activity continues as we follow a methodical process for finding and analyzing opportunities. We continue to look for and meet with companies, who we feel have accretive businesses that support pro fires growth and scale initiatives with our current and future markets and customers.

Cameron M. Tidball: We continue to look for and meet with companies who we feel have accretive businesses that support Profire's growth and scale initiatives with our current and future markets and customers. As we look to the coming quarters and years, Ryan and I are optimistic and excited about our future. Our traditional customers will continue to automate their new and existing heated appliances. They will continue to look to Profire to enable improvement in efficiencies and lowering their overall GHG emissions. Regulations that are in place point to the need for our solution.

Cameron M. Tidball: As we look to coming quarters and years, Ryan and I are optimistic and excited about our future. Our traditional customers will continue to automate their new and existing heated appliances. They will continue to look to profile to enable improvement of efficiencies and lowering their overall GHT emission regulations that are in place point to the need for our <unk>.

Cameron M. Tidball: Dilution or.

Cameron M. Tidball: Our diversification progress related to burner and combustion management solutions in new industries continues to gain momentum as we prove repeatedly that our over 400 years of combustion experience brings value to several industries and markets. Before we turn to questions, Ryan and I thank you for your interest in and support of Profire. To all of our team members, thank you for all you do to support our customers and our shareholders and each other. Operator, would you please provide the appropriate instructions so we can get the Q&A started?

Cameron M. Tidball: Our diversification progress related to burner combustion management solutions and new industry continues to gain momentum as we proved repeatedly that our over 400 years of combustion experience brings value to several industry the markets.

Speaker Change: Before we turn to questions, Brian and I. Thank you for your interest in and support of profile.

Cameron M. Tidball: All of our team members. Thank you for all you do to support our customers and our shareholders and each other operator would you. Please provide the appropriate instructions. So we can get the Q&A started.

Operator: We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as our callers join the queue. The first question comes from Rob Brown with Lake Street Capital Markets; please go ahead.

Speaker Change: We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad you.

Operator: You will hear a tone acknowledging your request.

Robert Duncan Brown: Youre using a speakerphone please pick up your handset before pressing the keys.

Robert Duncan Brown: To withdraw your question. Please press Star then two.

Robert Duncan Brown: We will pause for a moment as callers join the queue.

Operator: The first question comes from Rob Brown with Lake Street Capital markets. Please go ahead.

Robert Duncan Brown: Good morning. First question on just some of the kind of macro environment, the pluses and minuses you went through pretty well. You know, do you expect the kind of growth to resume in the, I guess, legacy business in the back half as these cross currents sort of stabilize, or how do you see this sort of playing out for the next 12 months?

Robert Duncan Brown: Good morning, Ryan.

Operator: Okay.

Robert Duncan Brown: First question on just some of the kind of macro environment, the pluses and minuses you went through pretty well.

Ryan W. Oviatt: Yeah, that's a good question. And I guess our crystal ball is probably as cloudy as yours might be with that regard. But we do think there are a number of things coming into play that point to that, to the fact that it could be better and likely should be better in the second half. As we mentioned, we did have a few projects that pushed out a quarter because of customer preparation readiness, some issues on their side.

Ryan W. Oviatt: So those will come in, in the second quarter or third quarter, potentially. I think most of them are already in the second quarter, but that would have been about another million dollars of revenue that we would have seen in Q1. But on top of that, as we mentioned, we do think that things are picking back up. The EIA forecasts a pretty rapid recovery in natural gas prices this summer and heading into next winter, which, again, we don't know what the winter season will be like next winter or in the fall.

Ryan W. Oviatt: Prices this summer.

Ryan W. Oviatt: And heading into next winter, which again, we don't know what the winter season will be like next this coming winter in the fall, but we think those dynamics.

Ryan W. Oviatt: But we think those dynamics, combined with ongoing challenges in the Middle East, are going to be another means of strengthening commodity prices, which will then have an impact on U.S. producers, their willingness to produce, and to continue to invest in their own infrastructure. So yeah, overall, we think that things will continue to improve in the coming quarters of this year.

Ryan W. Oviatt: Combined with ongoing challenges in the middle East are going to be another means of strengthening commodity prices, which will then have an impact on.

Ryan W. Oviatt: U S producers their willingness to produce to continue to invest in their own infrastructure.

Ryan W. Oviatt: So yeah overall, we think that things will continue to improve in the coming quarters of this year.

Speaker Change: [noise], Okay, great good to hear on the on the the presentation efforts I think he just talked about a doubling of the of the revenue this year or this quarter and then you know a sense of a pretty strong sales pipeline.

Robert Duncan Brown: Great to hear. On the diversification efforts, I think you talked about a doubling of revenue this year or this quarter and then, you know, a sense of a pretty strong sales pipeline. And I know there's a bit of a timeline there to get orders in, but could you just characterize the sales pipeline a little more about maybe the size of it and what you're seeing in terms of project activity?

Robert Duncan Brown: And I know, there's a bit of a timeline there to get to get orders in but could you just characterized sales pipeline and a little more about.

Robert Duncan Brown: About maybe the size of it and what you're seeing in terms of project activity.

Speaker Change: Yeah, I certainly can do you Wanna give us more color on the diversification efforts and pipeline.

Ryan W. Oviatt: Yes, certainly. Cam, do you want to give us more color on the diversification efforts in pipeline? Yeah, you bet.

Cameron M. Tidball: As we look at, you know, the first quarter, obviously, critical energy infrastructure for us or that downstream side of midstream, those big plants that we've really been working on. That leads the charge as an overall percentage because it's just the bigger part of our business so far, and so that really helped us to overall develop. When we talk about the non-oil and gas tripling from the year ago quarter, most of the business we're finding for Profire is coming from projects related to things like RNG, Renewable Natural Gas Production, or methane abatement.

Cameron M. Tidball: Yeah, you bet. Thank you so much.

Cam: Yeah, you bet. Thank you so much as we look at you know the.

Cameron M. Tidball: The first quarter, a obviously critical energy infrastructure for us or the downstream side of midstream those big plants that we've really been working on that.

Cameron M. Tidball: That leads the charge an overall percentage because it's just you know it's just a bigger part of our business. So far and so that really helped us still raw double when we talk about the non oil and gas tripling Ah from the year ago quarter.

Cameron M. Tidball: Most of the business, we're finding for pro fire is coming from projects related to things like Orangey.

Cameron M. Tidball: Renewable natural gas production or messing abatement and so.

Cameron M. Tidball: And so we're seeing a lot of sources for renewable natural gas coming on, and then it's just like, okay, is that just moving natural gas production around maybe a little bit? It's still so very small compared to the overall need for natural gas, but those are neat projects for us. But really, methane abatement, which hits so many different industries that we're seeing more and more traction, whether it be at landfills, whether it be at agricultural sites, or manufacturing facilities.

Cameron M. Tidball: We're seeing a lot of sources for renewable natural gas coming on and then it's just like little kids that just moving natural gas production around maybe a little bit it's still so very small compared to the overall need for natural gas, but those are neat projects for us, but really the methane embankment, which really hit so many different industries.

Cameron M. Tidball: That we're seeing more and more traction whether it be at landfills, whether it be at agricultural sites or Ah manufacturing facility. So.

Cameron M. Tidball: So these are great opportunities for Profire. When we talk about the pipeline, obviously, we don't give out the numbers, but we're very confident, as we said. We believe that we are fully on track to exceed last year's results in diversification. So last year, finishing the year, total diversification around that 12% of Total Revenue, which again, was our highest ever; we believe that we're going to be able to exceed that.

Cameron M. Tidball: These are these are great opportunities for profile when we talk about the pipeline. Obviously, we don't give out the numbers, but we're very confident as we said we we believe that we are fully on track to exceed last year's results of diversification. So last year, finishing the year total diversification around that 12%.

Cameron M. Tidball: Of total revenue with chicken the top line was our highest ever we we believe that we're gonna be able to exceed that the pipeline is growing with existing customers doing repeat borders which is a great thing and it just shows that we're not just one and done projects that were actually able to to deliver something.

Cameron M. Tidball: The pipeline is growing with existing customers doing repeat orders, which is a great thing. It just shows that we're not just one and done projects, that we're actually able to deliver some great results. And from that, we're seeing more and more from marketing leads, just the sales team getting more comfortable, the existing non-oil and gas focused team members who are getting more comfortable to be able to take reference cases.

Cameron M. Tidball: Some great results and and from that we're seeing more and more from everything from marketing leads just a sales team getting more comfortable the the existing non oil and gas focus team members, who are getting more comfortable to be able to take reference cases, the bid pipeline is never.

Cameron M. Tidball: The bid pipeline has never been stronger, but some of these projects, as you mentioned, are longer-term cycles. They could take longer to land, longer to procure, design, and deliver. But even with those, just with our pipeline right now, we have set the stage with our

Cameron M. Tidball: Ever been stronger, but some of these projects as you mentioned there are longer term cycle, they can take longer to land longer to procure design and deliver but even with those just with our pipeline right. Now we have we have set the stage with our queue on performance.

Cameron M. Tidball: The last year.

Robert Duncan Brown: Okay, great. Thank you. I'll turn it over, and congratulations on all the progress. Excellent. Thanks, Rob.

Speaker Change: Okay, great. Thank you I'll turn it over and congrats on all the progress.

Speaker Change: Excellent thank trouble.

Operator: Once again, if you have a question, please press star then 1. The next question comes from John Bair with Ascend Roths Advisors. Please go ahead.

Speaker Change: Once again, if you have a question. Please press Star then one.

John H. Bair: The next question comes from Joan down with Us.

John H. Bair: Ah Sandra also advises please go ahead.

John H. Bair: Good morning, Cameron, Ryan, and John. Yeah, they're a couple of Western Canadian pipelines that are ramping up, and I'm just wondering if you're seeing any interest from some of the Tar Sand companies, you know, producers, and so forth that are maybe looking to ramp up their production or increase it to help fill those pipelines as we go forward.

John H. Bair: Good morning Hammond Ryan.

Speaker Change: Hey, John I'm learning it.

Cameron M. Tidball: Can you...

Speaker Change: Yeah, they're.

Cameron M. Tidball: A couple of.

Cameron M. Tidball: Western Canadian pipelines that are ramping up and I'm just wondering if.

Cameron M. Tidball: You're seeing any.

Cameron M. Tidball: Interest from some of the car.

Cameron M. Tidball: Tarsand companies, you know producers and so forth it or.

Cameron M. Tidball: Maybe look into a ramp up their production or or increase it to help fill those pipelines as we go forward can you shed any light on that.

Cameron M. Tidball: So we have this wonderful anomaly in the Alberta and Saskatchewan markets called Spring Breakup. Well, with a very odd warm winter and interesting spring, having received snow last week and then it's gone in the 60s and 70s already, but we've kind of seen a shift in the Spring Breakup period and obviously these pipelines coming on board finally, the overpriced pipelines that have been built. We've seen Canada for the most part...

Speaker Change: Yeah can you Wanna come in.

Speaker Change: Yeah. We so we have this wonderful anomaly in in the Alberta, and Saskatchewan markets called spring break up well with a very <unk>.

Cameron M. Tidball: Odd warm winter and interesting spring, having received snow last week, and then it's gone and in the sixties and seventies already but we've kind of seen a shift in the spring break break up period, and obviously these pipelines coming on board finally, the overpriced pipelines that have been built.

Cameron M. Tidball: We've seen Canada for the most part.

Cameron M. Tidball: The drilling activity has not gone down as a percentage like the United States, and that's all in anticipation of being able to fill this pipeline. So yes, we do probably see an increase in drilling and activity and production in Canada because of these new accesses to the market. We're seeing an improvement in the, a lessening of the discount that usually the Western Canadian select hydrocarbon takes in the market because usually it has to go all the way. South through Cushing, now there's access to European and Asian markets through these new pipelines. So, yes, in short, we do expect to see a little more activity from players in Canada.

Cameron M. Tidball: They're the drilling activity has not gone down as a percentage like the United States and that's all in in anticipation to be able to fill this pipeline.

Cameron M. Tidball: So yes, we do see probably an increase to Ah drilling and activity in production in Canada, because with these new access to markets. We're seeing an improvement of the Ah lessened of the discount that usually the western.

Cameron M. Tidball: Canadian select hydrocarbons takes in the market because usually it has to go all the way.

Cameron M. Tidball: Sell through Cushing now, there's access to European and Asian markets through Ah through these new pipeline. So yes in short we we do expect to see a little more activity from.

Cameron M. Tidball: Some players in Canada.

Cameron M. Tidball: So [noise].

Cameron M. Tidball: and Seth Rogen. Do you anticipate or have you had any indication that maybe there's an increase? Well, let's say, existing customers might be, you know, increasing their interest in Profire products, or there may be some smaller, newer, or different... previously non-existing customers that might, you know, approach you.

Speaker Change: Do you anticipate or have you had any indication that maybe there's an increase.

Cameron M. Tidball: Let's say say existing customers.

Cameron M. Tidball: Might be you.

Cameron M. Tidball: You know increasing their their interest in profile products or there may be some smaller newer or different.

Cameron M. Tidball: Previously non existing customers that might you know approach you.

Cameron M. Tidball: The Canadian market is obviously our oldest market. Profire holds a dominant market share here. A lot of the consolidation that we saw in the United States last year has already really occurred in Canada. The players are the players.

Cameron M. Tidball: The Canada market is obviously are all this market profire holds a dominant market share. It here a lot of the consolidation that we saw in the United States last year is already really occurred.

Cameron M. Tidball: In Canada. The players are the players then and I'm sure, we'll see some consolidation just for for scale and just lowering overall costs, but for the most part it's existing customers. We know, they're just gonna pick up activity there aren't really any.

Cameron M. Tidball: And I'm sure we'll see some consolidation just for scale and just lowering overall costs. But for the most part, it's existing customers. New players, as per se, but there will be more interest in exploiting existing acreage. Automation strategies are always in place here, they're trying to retrofit things. There are still many, many opportunities left. Yeah, really, what it comes down to, John, is existing customers doing more than they would when they have a lower per barrel price.

Cameron M. Tidball: New players as per se, but there will be more interest into exploiting existing acreage automation strategies are always been place here, they're trying to to retrofit things are still many many opportunities left but yeah. It really what it comes down to John will be.

Cameron M. Tidball: Does this thing customers doing more than they would when they have a lower per barrel price to work with.

Cameron M. Tidball: And on the regulatory front, are there any new laws in place that would help stimulate more demand for your products for methane capture, you know, baiting, that kind of thing?

Cameron M. Tidball: And on the regulatory front is there are there any new.

Cameron M. Tidball: Laws in place that would help.

Cameron M. Tidball: Stimulate or a demand for your products for nothing capture payment that kind of thing.

Cameron M. Tidball: Yeah, that's definitely been a driver for the last couple years. You've got everything from the EPA, you have the Inflation Reduction Act. Moving things there. You have the carbon tax in Canada, which has become more aggressive this year, but companies have really gotten ahead of a lot of these things and are just working on the programs because they have so many assets to take care of. Quad O, B, and C are areas of, you know, United States legislation.

Speaker Change: Yeah. That's that's definitely been a driver really last couple of years, you've got everything from E. P. A.

Cameron M. Tidball: You have the inflation reduction act, which is moving things there you have the carbon tax in Canada, which has become more aggressive this year companies of <unk>.

Cameron M. Tidball: Really gotten ahead of a lot of these things and just working on the programs because they have so many assets to take care of quite O B and C. R areas of you know the United States legislation.

Cameron M. Tidball: It's not so much legislation. Yeah, I guess it is Where Profire products and solutions are concerned, it points an arrow right at us. It doesn't say Profire wishes it would, but it does point to what you need to do in terms of not venting methane, raising your efficiencies, Complete Combustion, all these things, all things that Profire is focused on.

Cameron M. Tidball: So much legislate yeah, I guess it is we're profire products and solutions.

Cameron M. Tidball: It points, an arrow right at us it doesn't say profile wish it would but it does point to what you need to do in terms of Ah not eventing methane.

Cameron M. Tidball: Raising your efficiencies.

Cameron M. Tidball: Complete combustion all these things all things that Profire is focused on.

Cameron M. Tidball: Yeah.

John H. Bair: Last question here. Have you actually reached out to say, state departments of natural resources that are states with production, like here in Ohio, where they're going out and either, you know, trying to P&A. Orphan Wells or Moniker. Methane, you know, Escape or whatever from older wells or existing wells for that matter and and perhaps, work with them at all. Provided out with new new

Cameron M. Tidball: Last question here have you.

John H. Bair: Considered or.

John H. Bair: Actually reached out to say state.

John H. Bair: Department of natural resources that are states of with production like here in Ohio.

John H. Bair:

John H. Bair: Where there where they're going out and either you know trying to PNA.

John H. Bair: Orphan wells or monitor.

John H. Bair: Methane.

John H. Bair: You know.

John H. Bair: [noise] escape or whatever from older wells were existing wells for for that matter and and and perhaps.

John H. Bair: Work with them at all.

John H. Bair: Provide an outlet knew it was you know customer perhaps.

Ryan W. Oviatt: In Ohio, we do have a P&A program at the state level and, you know, abandoned wells and whatnot. So, you know, I don't know exactly how it works as far as, you know, the activity that the state undertakes to do that. But it seems that that might be an interesting market. Yeah, that's an interesting perspective on it. We certainly haven't done any outreach to specific states or departments of natural resources, but we do have a number of customers that are doing that themselves, either for their own wells or coal mines that are being abandoned or shut down, or other companies that are doing that on their behalf.

John H. Bair: We certainly have other words here and I'm in Ohio, We do have a a P. In eighth program at the state level and you know band in wells and whatnot. So.

Ryan W. Oviatt: You know I don't know, how how would it exactly how it works as far as you know the actor.

Ryan W. Oviatt: Activities at the state undertakes to do that but it seems that that might be a an.

Ryan W. Oviatt: An interesting market.

Ryan W. Oviatt: Yeah, that's an interesting perspective on it we we certainly haven't haven't done any outreach to specific states or department of natural resources, but we do have a number of customers.

Ryan W. Oviatt: That are doing that themselves either for their own.

Ryan W. Oviatt: Wells or coal mines that are being abandoned or shut down.

Ryan W. Oviatt: Or other companies that are doing that on their behalf. So we do have a number of applications, where our systems are on methane capture equipment and destruction capture and destruction equipment for those types of resources that are being shut down or Martha.

Ryan W. Oviatt: So we do have a number of applications where our systems are on methane capture equipment and destruction equipment for those types of resources that are being shut down or. [inaudible] at the end of their lives.

Ryan W. Oviatt: Called.

Ryan W. Oviatt: At the end of their lives.

Ryan W. Oviatt: Oh, there's an awful lot of hold wells out there. So I would think that might be an interesting area of opportunity. So.

Cameron M. Tidball: Well, you know, Ohio is probably at the forefront of tackling the Orphan Well project. It's the most well funded, I think there's funding way out into 2035 for that in Ohio. So they're ahead of the game there. But when it comes down to it, as Ryan mentioned, Yeah, our products and solutions do fit that. And there are many like, I'll call them clean tech or

Speaker Change: Well you got Ohio is probably at the forefront of tackling the orphan well project.

Cameron M. Tidball: It's the most well funded I think there's a funding.

Cameron M. Tidball: Way out into 2035 for that in Ohio. So there there ahead of the game there, but when it comes down to it is Ryan mentioned yeah.

Cameron M. Tidball: Our products and solutions do you fit that in there are many like a column cleantech or capture Oh and engineering firms that are looking at these problems you've got several websites like for example, NASA.

Cameron M. Tidball: You can go online and you can see where everything's venting, sometimes it's a little dated Ah, but as a as a sales and marketing initiatives that profile. We do look at these things and to see if there is leaves that can be generated going to directly to the legislative bodies is Ah is definitely a challenge.

Cameron M. Tidball: Would be a challenge for pro fire just to get into the right space, but sometimes were brought into those conversations just from our customers themselves.

Cameron M. Tidball: Yeah.

John H. Bair: Very good. Good luck over the next quarter and beyond. Thank you, and The New York Times.

Cameron M. Tidball: Very good good luck there.

Cameron M. Tidball: Next quarter and beyond.

John H. Bair: Yeah, I think he thinks Joan.

John H. Bair: C N N New York.

John H. Bair: Absolutely.

Operator: Ladies and gentlemen, there are no further questions in the queue. I would like to hand the call back to management for closing remarks. Thank you.

Speaker Change: Ladies and gentlemen, there are no further questions in the queue I would like to have to call back to management foreclosed remarks. Thank you.

Ryan W. Oviatt: Well, thank you everyone for joining us on our call today and thank you, all of you, for your continued support. As always, we're available for any discussions or questions you may have. We will also be participating in the Three-Part Advisors Ideas Conference in New York on June 13th and hope to see you there. Thank you and have a great day.

Speaker Change: Well, thanks, everyone for joining us on our call today and thank you all of you for your continued support as always were available for any discussions or questions. You may have we will also be participating at the three part advisers ideas conference in New York on June 13th and hope to see you. There. Thank you and have a great day.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Operator: Mhm.

Operator: [music].