Profire Energy Inc (PFIE) 2016 Q1 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Profire Energy's fiscal first quarter ended June 30, 2015. Joining us today is the President and CEO of Profire Energy, Brenton Hatch, and VP of Finance and Strategy, Nathan McBride.

Before we begin today's call, I would like to take a moment to read the Company's Safe Harbor statement, a cautionary note regarding forward-looking statements. Statements made during this call that are not historical are forward-looking statements. This call contains forward-looking statements, including but not limited to statements regarding the Company focusing on reducing expenses, improving operational processes, and making necessary investments; the Company's chemical management system being a good strategic decision, and the products' ability to give the Company access to new markets and future growth; the Company's R&D team being able to complete development and testing of new management systems and those products' ability to open up opportunities in markets; the first half of the fiscal year being more difficult than the second half of the year; the Company being in an operational and cost steady-state in Q2; the Company focusing resources in geographic areas believed to produce the highest return on investment; the Company's belief that its management of the current industry turbulence could enhance the long-term effectiveness or efficiency of the Company, or the Company's future performance relative to guidance discussed on this call. All such forward-looking statements are subject to uncertainty and changes in circumstances. Forward-looking statements are not guarantees of future results or performance and involve 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 risks and factors identified in the Company's periodic reports filed with the Securities and Exchange Commission. All forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are made only as of the date of this release and the Company assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances except as required by law. Readers should not place undue reliance on these forward-looking statements.

I would like to remind everyone this call is being recorded and it will be available for replay through August 17, 2015 starting later this evening. It will be accessible via the link provided in today's press release as well as the Company's website at www.ProfireEnergy.com.

Following Mr. Hatch's and Mr. McBride's remarks, we will open the call up to your questions. Now I'd like to turn the conference over to the President and Chief Executive Officer of Profire Energy, Mr. Brenton Hatch.

Thank you very much. Good afternoon everyone. Thanks for joining us today. It seems like it was just a few weeks ago that we had our last conference call, but nonetheless we are excited to provide an update on our first fiscal quarter and what is sure to be an interesting 2016.

Now, as you may remember from our previous earnings calls, we expected and still do a fairly difficult year in terms of revenues and profitability. However, given the turbulence in the industry, we feel quite good about not only our staying power but our ability to become a more efficient, robust company through this period of time.

So while we realized a nearly 50% reduction in revenue, we successfully reduced costs in a very significant way, over $700,000 in operating costs compared to the preceding quarter, to be precise, and are starting to see more MSAs come through than we've seen in recent quarters. We have a lot of conversations now going again, often with new customers, and are simply being told to hang on until budgets are loosened up again.

So, overall, it was a difficult quarter, but I would note that we have a large cash reserve. We were able to increase cash this quarter, have a strong network of potential customers and feel we have significant staying power.

Now, when looking at the quarter in comparison to last year's comparable period, it is certainly a stark contrast because the environment we are operating in today is completely different from the $100 oil prices and significant industry spending that just one year ago was driving record activity across the oilfield. But while we did experience a loss last quarter, which as you know is very rare for us, we are genuinely optimistic for our future because of our people and their talent to continually make the Company better.

Together with our financial position, we have more of a growth-related stress rather than a survival-related stress. So while we are not immune to the difficulty in the industry, we are in a very different position in a good way than many other companies currently are.

We truly feel that this downturn has forced us to focus internally and that it will make us better in the long run. We have already made meaningful changes across the Company. We have reduced cost in many areas, improved operational processes, and refocused our efforts in R&D, all in an effort to enhance our long-term strategic capability as a company.

We believe the expansion of our product lines to include a chemical management system was a great strategic decision, and we anticipate the CMS will drive significant growth in the coming years. Additionally, as our R&D team completes the development and testing of our new generation management system, we believe that these new products could open up new opportunities and markets for us even in other industries. So stay tuned on those fronts.

So while there are certainly significant industry challenges to work through, we are still excited about the months and years ahead as we seek to build upon the foundation we have established and bring new solutions to the oilfield.

But before I talk any further, I want to turn the call over to Nate McBride, our VP of Finance and Strategy, to discuss the financial results of the quarter. Nate?

Thanks Brent and hello everyone. It's great to be with all of you today. This afternoon, we filed our Form 10-Q with the SEC and discussed the quarter's highlights in a press release. And as always, both of those documents are available on the Investors section of our website, as will this transcript in the coming days. So that said, let's go ahead and jump into the income statement.

In our first fiscal quarter of 2016, our total revenues did decrease 48% over the same year-ago quarter to $6.9 million. The decreased purchasing from oil and gas companies stemmed from budget constraints due to the drastic price decline in underlying commodities.

Now, while we are anxiously working to return our growth rates to those we've seen historically, we are also realistic in our assessment of the effect that the industry turbulence may continue to have on us, mostly in the short-term. We still believe that the first half of the fiscal year will be the more difficult one, but we do anticipate that revenue levels will begin to pick up in the latter half, though that could of course change if the commodity prices remain particularly volatile or suppressed.

Moving on, our gross profit decreased to $3.3 million or 48% of total revenues as compared to $7.4 million or 57% of total revenues in the year-ago quarter. The biggest drivers leading to the decrease in our gross profit percentage year-over-year were, first, the increased allocation of overhead to cost of goods sold, which was derived from our larger fixed asset base; and second, an increase in proportional service activity, which of course carries a much lower margin than our products do. We do not feel that this is reflective of our long-term profitability potential, and as we realize lower gross and net margin levels largely due to a deleveraging affect derived from our lower revenue levels, we are confident we have made the appropriate long-term investments needed to significantly ramp revenues in the future. So for those reasons, we feel that higher revenues combined with our recent cost structure changes and operational improvements will help us regain both historical gross and net margin levels.

Total operating expenses decreased to $3.9 million or 56% of total revenues from $4.1 million or 31% of total revenues in the same year-ago quarter, even with a $100,000 nonrecurring severance expense that hit in the first quarter as part of Andrew's departure. Although we expect to continue to deal with a difficult industry environment for some time, we are focusing our resources in geographic areas that we believe will produce the highest level of total revenues and return on investment, including Colorado, Ohio, Pennsylvania, South Texas, and Alberta. When compared with the same year-ago quarter, operating expenses for general and administrative costs decreased 18%, R&D increased 12%, payroll increased 16%, and depreciation decreased 14%.

As Brent mentioned, we have worked very hard over the last few quarters to reduce costs and become more efficient across the Company. And as you can see, we have done that. We believe we could potentially reduce costs even further but are being deliberate about preserving our long-term growth opportunities.

Total other expense during the period was $69,230, the majority of which was attributable to the effect of exchange rates on certain intercompany balances. Our net loss was $458,813, or a loss of $0.01 per diluted share, compared to net income of $2.2 million, or $0.05 per diluted share, in the same year-ago quarter.

Cash and cash equivalents totaled $17.2 million as compared to $4.6 million in the same year-ago quarter, the increase being largely attributable to the equity raise completed last year. I would also note that, in Q1, we realized a net decrease in cash of over $3 million. Now, even if we don't include changes in net asset and liability counts, we are still about breakeven on a cash flow basis. So I think that speaks to our staying power, and certainly gives us confidence to navigate the coming quarters.

Now, to reiterate what Brent noted earlier, when considering the comparisons I have described here, please bear in mind at last year's Q1 period was the most profitable quarter in our history, and of course coincided with a time when oil prices were more than $100 per barrel. So a very different environment, I might suggest.

So, in summary, as Brent discussed earlier, this is a very difficult time for our industry but we are positive about our long-term market opportunity. The key to our success moving forward will be our ability to plan and adjust appropriately for commodity price pressure and recognize long-term opportunities for investments with significant returns as well as identifying ways to leverage our expertise into additional markets and even industries with less oil and gas price risk. We feel we are positioned well for the coming months and years as the industry finds its balance in activity and commodity prices.

Now, apart from our hopes that the macro environment will improve, which may or may not happen by fiscal year-end, we are proud of a number of initiatives we have already pursued as well as others that we have in mind. Our recent cost reductions, for example together, with our CMS momentum and R&D pipeline, have given us a very bright outlook for the coming quarters and years. And if you don't share that sentiment currently, I would encourage you to come to our shareholder meeting in September and we will be filing those proxy materials shortly. But I would encourage you to come see our facilities, meet our team personally and get a sense in person for our vision.

Finally, let me just add that we are very appreciative of each of you as shareholders. We take your trust and investment very, very seriously. We try to be available for questions and comments and we hope you have a sense of our passion here at Profire because many of us internally of course are shareholders and are anxious to recapture the historical growth rates we've seen for so many years. We are confident we can do it and hope you have the same sense.

So thanks, Brent. I'll send it back to you.

Thanks Nate. It's great to have Nate join me today to present on the call. And as you all know, Nate is extremely capable. He stepped up to fill a void. We appreciate all he has done to support the executive team and the board as we have been searching for a new CFO. As far as the progress on that front is concerned, we have interviewed many very qualified candidates for the CFO position, selected a handful of final candidates, and each of those candidates have been interviewed by our audit committee chair and reviewed with the board. We feel we are very close to making -- to having a successful candidate. We will keep everyone posted when a decision has been made. Of course, scheduling permitting, we will do our best to quickly introduce our new CFO to all the stakeholders when that time comes.

In summary, we truly feel that the future is bright for the Company in the long-term, and that we are well-positioned to manage through this current industry volatility. As we have reiterated before, we feel that it's not a question of whether or not we will make it through the industry storm. It's more a question of how capably we manage the process, how much we learn and how much strategic positioning we can do in these coming quarters. We have no debt. We have significant cash reserves. We have our eyes open for opportunities to make acquisitions, or investments that we believe could be accretive to the Company.

We affirm our previously stated guidance. We are guiding for total revenues between $25 million and $30 million with net income of negative $1 million to positive $2 million. We still anticipate that purchasing activity during the third and fourth quarters may begin to pick up and anticipate leveraging some operation efficiencies created during Q1 and Q2. However, that could change if the underlying commodity prices continue to be volatile. Nonetheless, we remain confident about the long-term opportunities of the Company and our ability to strategically direct the Company in the future.

Again, our history as a company is primarily one of significant gross and net margin, significant growth, and of course no debt. We feel we can manage the coming quarters to ensure that such remains the case in the long-term.

With that, I'd like to open up the call to questions. So operator, would you please provide the appropriate instructions so we can get the Q&A started?

(Operator Instructions). William Bremer, the Maxim Group.

Let's begin. Can you just sort of give us a sense of what was the largest order that was realized in this first quarter?

I really couldn't tell you specifically. As I alluded to in my previous comments, we've got a lot of new customers. That's one of the real highlights I think of this quarter is that our salespeople have gone out and established contracts, or at least relationships, with a number of new companies. We've made some sales to them. And although some of our sales have dropped off with some of our previously held customers, we are very excited about establishing this base with new ones so that when things do turn around, we will be drawing from many companies rather than just the few solid ones that we've had. So I can't give you the specifics on that right now, Bill.

Okay. Maybe a different way of asking. Regulation 7, Colorado, how is that impacting your product line right now and your company?

It was really very good initially when the legislation first came out, but we have yet to see, recently at least, significant purchasing in this regard. I think what's happening is because of the cutbacks of all these companies, that they are waiting closer to the end of the deadline date. That's not to say that we haven't been doing things with companies like Anadarko and so on but -- we are making sales there -- but we anticipate things picking up significantly as the deadline comes forward.

I might just jump in, Bill. As Brent mentioned, relative to what we thought it could have done in the first couple of years, certainly if the drilling had been maintained as we thought it could have, I think it could've been a lot more meaningful contributor right away. But Colorado, even setting that aside, Colorado still has been a very productive area for us. It's one of our top producing areas, as Brent mentioned. It's not quite where we'd like it to have been based on that regulation, but it has been meaningful.

Okay. One more question and then I'll hop back in queue. Could you give us a sense of the sales personnel as well as the service personnel? The service and margins really dropped off the cliff there. I just wanted to get a sense of the strategy going forward. How many sales individuals do we have at this point and how many service personnel?

We have presently 17 in our sales group, and we have 18 in our service group. The service group is of course not strictly service. They are an integral part of the whole sales operation and often set up sales for us as they are out there. But at the present time, those are the numbers, 17 and 18 respectively.

Okay. I'll hand it off to someone else and then come back in queue. Thanks.

Rob Brown, Lake Street Capital Partners.

Good afternoon. I just wanted to push a little more on the visibility question. When you're having conversations with customers, they say they're waiting for budgets. But what's sort of the interest level in the product right now, and might budgets loosen up later in the year, or is it really a question of looking to next year's budget cycle, or where are you at in sort of your customer conversation?

That's a great question. We never know for sure what the companies are going to do. It has started to establish some budgets, but it's pretty tentative right now. The outlook is really quite optimistic at the field level. When our sales force goes out, they are told over and over again, don't forget us. We love you. We want to provide your product to us. But hang on. We just can't do anything right now, so just stick with it, but don't quit on us. And so we take that -- and we see this over and over and over again not just with one or two companies. We think that it is being very positive for our future, that one day when prices do stabilize a little or maybe when the cost cutting is completed as these companies see they want to accomplish, that we will start to do a little bit more as these budgets are established. It's interesting to note that many of these companies have cut their costs by 30% to 40% even, and therefore are able to operate at lower oil prices. And so we anticipate this having a positive effect in coming quarters.

That's good color. Thank you. Then on the chemical management business, could you just give us an update there on how many units you've sold, where that is in the sales pipeline, and how you see that growing?

You bet. That's really been kind of an exciting thing for us. We've got about 100 units out there now, close to, high 90s for sure. And some of these are trial units that these companies are putting out there. But we are getting many calls from companies or they are accepting many of our calls.

Chemicals are a significant part of the costs of these companies, sometimes number two and number three behind manpower. And so anything that they can do, especially if they are moving towards these cost cutting measures, anything that they can do to cut costs of something that is significant, they seem to be interested in doing it. We have had a number of companies where we have pulled units out that have shown very impressive returns. We have been -- in a couple of cases, we had payback as short-term as six weeks, two months, that sort of thing. And that of course creates a great deal of interest for them. So we are very enthused about that, anticipate towards the end of the year again seeing some more significant sales from the chemical management end.

Good. Thank you. And then on the cost structure, do you feel like your operating cost structure now is sort of at a level or is there more potential to come out there?

I think we are just about there. I think we've mentioned a couple of times that Q2 we feel will be pretty representative of a steady-state from an OpEx standpoint, and I think that's fair to say. But you can see how much those have come down even just in Q1. And so I think keeping OpEx at these levels is a fairly realistic thing to have in mind.

Okay. Thank you. I'll turn it over.

Jim McIlree, Chardan Capital.

So can you talk a little bit about inventory and receivables going forward? I thought inventory would've dropped in the quarter. And I was curious if you think it could drop in Q2, or in the September quarter.

We appreciate you mentioning that. As you can see, inventory has come down from Q4 year-end. And that's been a deliberate effort on our part. Absolutely our ops team is focused on bringing that number down. I think it's not unrealistic to think it could come down further. I'm not going to suggest it could do so dramatically, but having that come down a little bit further I think is a realistic thing.

And when you look at receivables, obviously we've done a good job of collecting on so many of those accounts. And I think the number that we got here is about $7 million is probably a good working number. Obviously, it depends on what those sales look like in the coming quarters. But I wouldn't suggest that would come down real dramatically in the near future. That's probably a fairly healthy expectation to have.

Okay, great. And I wanted to make sure I understood your comments about OpEx. It seemed like you were saying that it could come down a little bit in the September quarter versus the June, but then I thought I heard you say that maybe current levels are stable. Did I misread one of those things?

I think materially, generally speaking, we are about there. And if anything, when you look, for example, I recently mentioned, as you think about Andrew's severance for example, that's $100,000. That's not going to be recurring. So there's that to consider. But I think largely we are about steady-state right now, and if you count for something, for example Andrew's severance coming out and not taking place again, then I think we are about there.

Okay. And Brent, you mentioned that -- you mentioned the new BMS (technical difficulty). Can you put a more precise timetable on when you think that product would come out? And secondly, when it does come out, would you target those new industries immediately or would that be a secondary target after you go after your traditional customer base?

I can't tell you the exact date that we will be doing this. The one thing that we don't want to do is bring out a really good product at a time when the market can't accept it because of limited or nonexistent budgets out there. So we are trying to time it based on what the oil industry is doing at the time. But I can tell you that it's imminent. It will happen before too very long. And will we do the oilfield first? We will probably because that's where most of our contacts are. That's where we will make our initial contacts. But we will immediately go after some of these industries as we have the opportunity over these coming months after we introduce this product.

Okay, great. And I know that the recent dip in oil prices has been short-lived so far, but has there been any reaction by your customers to this recent decline?

No, certainly not as significant as the previous one. And again, I just alluded to this a bit earlier. I think part of that is because they've done such significant cost cutting that they are able to weather this storm a little bit differently than they were the original one. When Shell laid off 50 million people, or how many ever they laid off, maybe not million (multiple speakers) how about we go thousands. It really does have quite an impact on their bottom line. So their budgets aren't as effective now as they were previously. So, we anticipate that, unless it drops a lot more, we don't see this being as significant.

Got it. Okay, great. Thank you. That's all for me.

Rudy Hokanson, Barrington Research.

Thank you. Hi Brent. A couple of questions. One, I think you went over in your call talking about areas of focus, geographical areas where we might concentrate a bit more. Am I correct?

Yes.

Could you just repeat that please, and give us an idea why those areas might be more important right now while you are trying to make sure that you're most effective?

You bet. Happy to do that. South Texas has been an area of focus for the E&Ps. They are actually getting quite aggressive in that region right now and pulling out of some of the peripheral areas in going there. Alberta, again, in Canada has always been the hotbed of action in Canada. And this seems to be springing back.

Colorado is one of those areas, and it -- I think for obvious reasons, because of the legislation that occurred there, it is certainly a focal point for us. There are a number of companies, big companies, that we are dealing with, doing some of the foundation work for when they want to pull the trigger on that one.

Ohio and Pennsylvania have been particularly good. They seem to have been less affected by the whole oil price drop than other regions. We are doing a lot of work there. We have good relationships with virtually all the big companies there. And we haven't seen as significant a drop there as we have in other regions. So those would be the ones. I'll just go through those again -- Colorado, Ohio and Pennsylvania, South Texas and then Alberta in Canada.

Okay. Thank you. And then maybe Nate, could you talk a little bit about the effective tax rate that you're expecting for the year that we should use in our modeling?

Yes. You bet. When you look at the tax benefit, one thing I'll just note is it may get thrown off a little bit here. Your model may be thrown off a little bit because of course there are things that really don't factor into that tax yield. And so you don't have what we would consider to be a more working normal rate. So I think probably closer to that 30% I think is pretty -- is a fair expectation have, somewhere in the neighborhood. Of course, it's a function of US and Canada there with the different tax rates at play, 25% to 35%. So that's something to keep in mind. But I think that 30% historical rate that we've tended to point to is still a fair rate to have in mind.

Okay. The other questions have pretty well been answered. Thank you.

Scott Billeadeau, Walrus Partners.

Hi guys. Just a question on the sales force. You talked about 17 in the sales group, 18 in the service group. A couple of things. You've got these guys focused on all products, or are there any that are focused on the chemical market? And then also on the new -- on the BMS, the better management, when it comes out for new industry, will you tap the current guidance you have or are -- who's going to attack that, the new opportunity?

That's a great question. I guess there's a couple of things at play. One is we have of course all these people out throughout North America, we want to be sure to leverage them and their presence and their boots on the ground in Canada and the US. And so on one hand, we want to make sure we capture that leverage. But on the other hand, of course you are naturally concerned about their efficacy and their ability to really capture the technical nuances of each of those products, and especially once you the start venturing into new industries. So those two things have been on our mind as well.

And so where we have landed from a strategy standpoint is we want all of our sales guys to be good enough to get the meeting, is kind of the phrase we will use. And we are developing -- and this is the idea long-term of course as well -- but developing these more specialized groups to go in and, once the meeting has been set up, to really go in and pitch those nuanced deals, whether it's chemical or it's a new industry, whatever the case may be. So, that's kind of the approach that we have drawn up internally so that we can leverage all those people, but we are also not diluting intellectually all of that real estate for them, and making sure we get the best of both worlds. So that's the thought from an approach standpoint.

Okay. Because that's -- we know sales guys will -- if there's (technical difficulty) or commissions, they're going to go to the easy -- the easy (multiple speakers) but they do want them out blazing new trails.

That's for sure.

If they're not in the comm system, right, they'll do well. The only other question I had is just any update on the -- I came in a couple minutes late, didn't know if there was any update on the CFO search at all.

I addressed this a little bit earlier in the preamble. But we have interviewed quite a number of actually remarkably talented people and are down to a few finalists in that. We've had those interviewed by our audit committee chair, excuse me, and each of us of course. The board has been apprised of who they are, what they are, and we will be making a decision shortly on who that individual will be. But we would expect in coming weeks, months to have someone in place, and actively going at replacing that position.

Great. And then just another question a little bit on whether visibility or pipeline or whatever, maybe -- are you -- given that the last year has been a ramp up and sales force kind of managing that and just being -- where are you on kind of the sales operations? What does the pipeline look like and what do you know, given how things have changed so much in the last 12 months? Are you comfortable about what's dropping in the top and what's going to pop out the bottom?

That was a ubiquitous question, what you do in terms of those. One thing that we are really trying to focus on is the fact that we know that this industry is going to turn around eventually here. And whether it happens in two quarters or two years, we don't know for sure. But the one thing we don't want to do is cut all of our sales force that have taken a year or two to train, to be comfortable with our products and so on, and have to start over at that point. We want to be prime and on the ground ready to go when the changes do happen. At the same time, we don't want to be throwing money out the window. And so very, very tough decisions, but we feel like we are getting to a number now that's working quite well for us. We are down fairly significantly from where we were at one point, but we've got very talented, very gifted guys now who are very conversant with the products and services that we have. So we are feeling fairly comfortable. And as we see things start to pick up a little bit, as we see these budgets established and more people running to set up meetings with us, we feel like the number is probably pretty good right here.

Okay, great. Thanks guys.

Walter Ramsley, S2 Partners.

Hello Brent. Most of the questions obviously have been answered, but I've got a couple of more high-level ones that maybe you want to tackle if you're interested. The natural gas industry, that industry had low prices for a number of years now. Do you think that segment is poised for some sort of improvement for whatever reason? And do you think they've also benefited at all from the kind of inventions in cost cutting that's taken place with the oil fracking, if they've been able to kind of transport some of that over to the natural gas and make that operation more profitable.

I put Nate in charge of all of those questions that nobody has an answer to. So we'll let him try.

Thanks, Walter, and thanks, Brent, as well. But as far as the natural gas bills, obviously there's a lot of analysts out there that have a lot of guesses, and they're about as diverse as they could possibly be. You think about some of the political things in play too affecting the industry, it throws a wrench into a number of things. Certainly, some of the trends are shared. Obviously as natural gas is pulled up with oil, you see some trends that are shared in terms of production and price. But I'm not sure I could give you a really good answer as to where we see it going. I guess, on one hand, we have hopes that it is around the short-term and a lot more confidence it will turn up around the long term.

But independent of all of that, the other thing I might make note of is that -- we've mentioned it a couple of times just briefly on the call -- but really our objective is to manage the Company in a way that really makes some of those things a lot less relevant in the long run so that we can expand into other industries, hedge away from some of this oil and gas risk that has been so prevalent, and eventually expand our presence. And you look at our history, we started as a service company and now really just about all of our revenue comes from products. And so that kind of flexibility and thinking ahead is something I think that is imperative to being successful in the long term. And I guess I would suggest that's our main thing. But as far as getting into the real specifics as to where natural gas is going, I'm not sure I could give you a real good sense there.

Okay. Do you have the split for the quarter between oil and natural gas for the revenues?

We haven't historically really gotten into details of what that split is. It does move around. But we haven't seen it change dramatically in the last few quarters. So old versus new, we haven't really discuss that. There's probably still a slight skew towards sort of new wells. And obviously there's a little bit of trend towards more and more retrofit as new has really slowed down dramatically of course. But as far as oil and gas, no, nothing historically different. But we typically haven't gotten into specifics on what that breakout is.

Okay. And then the chemical management system, obviously that thing has a lot of potential. How influenced do you think the sales of that are going to be by the oil price? Is that going to have the same sort of impact as the burner management, or is it going to sort of go its own way somewhat more easily?

I think probably it will be, especially in this marketplace, be an easier sell. Again, the focus of all of these companies is on cost cutting. And where this particular product can do such a -- make such a significant difference in terms of the cost of chemicals to them, I think that it will probably, if anything, get even more attention. We don't seem to have lost any of the interest in the CMS. The ability to purchase it has been somewhat limited by budget. But in terms of actual interest, this chemical management is really very fascinating for many of the companies. We've got quite a number of units out there on trial and test and some potentially significant contracts if they work out the way the companies think they will and we think they will.

That one sounds good. Anyway, thanks for taking the questions. I know it's a tough situation but you guys are doing a very good job.

At this time, this concludes our question-and-answer session. I would now like to turn the call over to Mr. Hatch. Mr. Hatch, please proceed.

Thanks, everyone, for joining us today on this first-quarter conference call. We would like to thank all of our loyal customers, our employees, our shareholders for their continued support and encouragement. Please know that we are of course available to all shareholders, analysts and others to discuss any questions or concerns that you might have. Feel free to contact us directly anytime. Thank you very much. Have a great day everyone. Thanks.

Again, I would like to remind everyone that this call will be available for replay through August 17, 2015 starting later this evening via the link provided in today's press release as well as available in the Investors section of the Company's website. Thank you ladies and gentlemen for joining us for our presentation. You may now disconnect.