Enservco Corporation (NYSE:ENSV), a provider of well-site services to the domestic onshore oil and gas industry, has reported robust financial results for the first quarter of 2024. The company announced a significant 125% increase in adjusted EBITDA and a 10% rise in gross profit margin compared to the same period last year. This growth is largely attributed to the colder winter and improved operational efficiencies. Additionally, Enservco revealed plans to acquire Buckshot Trucking in a transformative deal aimed at transitioning to a year-round logistics business, with the expectation of enhanced cash flow and growth prospects.
Key Takeaways
- Enservco's adjusted EBITDA soared by 125% year-over-year.
- Gross profit margin increased by 10%.
- Colder weather and efficiency improvements drove the positive results.
- The company plans to acquire Buckshot Trucking for $5 million.
- The acquisition aims to expand Enservco's non-seasonal business and improve financial stability.
- Strong revenue and high margins reported in Texas and Pennsylvania operations.
- The acquisition requires a shareholder vote and financing, which is expected to be arranged without difficulty.
Company Outlook
- Enservco is focusing on reducing debt and strengthening its financial position.
- The company is expanding its non-seasonal business portfolio.
- Enservco is confident in the successful completion of the Buckshot Trucking acquisition.
Bearish Highlights
- The acquisition of Buckshot Trucking is still pending shareholder approval and financing arrangements.
Bullish Highlights
- Strong market share position in Texas and Pennsylvania.
- Plans to continue increasing prices to leverage market opportunities.
Misses
- No specific misses were discussed during the earnings call.
Q&A highlights
- Rich Murphy discussed the company's performance in Texas and Pennsylvania, citing a smaller but high-margin fleet in Pennsylvania contributing approximately $3 million in revenue.
- Murphy expressed gratitude to shareholders and excitement about the future of the company as an energy logistics provider.
In conclusion, Enservco's first quarter of 2024 has shown promising financial improvements, with the company's strategic moves poised to further solidify its market position and financial health. The planned acquisition of Buckshot Trucking is a critical step in Enservco's expansion and transition into a more diversified logistics business. Shareholders and investors are watching closely as the company moves towards the acquisition's completion, expected in early July following a shareholder vote and the finalization of financing arrangements.
InvestingPro Insights
Enservco Corporation (ENSV) has demonstrated a notable performance in the first quarter of 2024, as reflected by the company's financial results. Here are some insights based on the latest data and tips from InvestingPro:
InvestingPro Data:
- The company's Price / Book ratio for the last twelve months as of Q1 2024 stands at 4.54, indicating a valuation that may be considered high relative to the company's book value.
- Revenue for the same period was $22.94 million USD, with a growth of 9.87% over the previous quarter, showing a positive trajectory in the company's earnings.
- Despite the revenue growth, Enservco reported a Gross Profit Margin of 15.39%, which suggests room for improvement in terms of cost management and profitability.
InvestingPro Tips:
- Enservco operates with a significant debt burden and may have trouble making interest payments on its debt, which is an important consideration for investors given the company's plans to acquire Buckshot Trucking.
- The company has experienced a strong return over the last week, with a price total return of 22.49%, signaling investor confidence in the short term. However, it's also important to note that Enservco does not pay a dividend to shareholders, which might be a factor for income-focused investors.
It's also worth mentioning that there are 11 additional InvestingPro Tips available at https://www.investing.com/pro/ENSV, which could provide further insights into Enservco's financial health and future prospects. For those interested in a deeper analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. These tips could be particularly valuable in assessing the risks and opportunities associated with the company's current financial position and its strategic acquisition of Buckshot Trucking.
Full transcript - Enservco Co (ENSV) Q1 2024:
Operator: Greetings, welcome to the Enservco 2024 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to your host, Wes Harris, Investor Relations for Enservco. Wes, you may begin.
Wes Harris: Well, good morning, and thank you, operator. We welcome everyone to Enservco's 2024 first quarter earnings conference call. Presenting on behalf of the Company today, Rich Murphy, our Executive Chairman, and Mark Patterson, our Chief Financial Officer. As a reminder, matters discussed during this call may include forward-looking statements that are based on management estimates, projections, and assumptions as of today's date, and are subject to risks and uncertainties disclosed in the company's most recent 10-K, as well as other findings with the SEC. The company's business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward-looking statements. Enservco assumes no obligation to update forward-looking statements that become untrue because of subsequent events. I'll also point out that management's ability to respond to questions during this call is limited by SEC Regulation FD, which prohibits selective disclosure of material non-public information. This conference call also includes references to certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings release. A webcast replay of today's call will be available after the call. The instructions for accessing the webcast are available in the earnings release. So with that, I'll turn the call over to Rich Murphy. Rich?
Rich Murphy: Thanks, Wes. Good morning, everyone. We appreciate you joining us for today's call. We began 2024 with solid first-quarter results that outperformed last year on a number of key financial metrics, including revenues, segment and operating profit, and net earnings, as well as a 125% year-over-year increase in adjusted EBITDA. Significantly benefiting this year's first quarter was substantial profit growth in our completion services segment that is primarily comprised of our frac-water heating business. As a reminder, this business is highly seasonal with any potential profits focused on the first and fourth quarters. Financial success during those periods is dictated by winter weather. The colder for longer is the better. As such, we were pleased to take advantage of the colder winter weather on average for this year's first quarter versus the same quarter last year. The first quarter of 2024 also benefited from our concerted efforts over the past couple of years to drive increased efficiency across the businesses. These efforts have been multifaceted, including shutting down our North Dakota operations in 2023 and reallocating assets to more productive operating areas that offered increased potential for revenue and profit growth. In addition to these efforts, we executed on several opportunities to right-side and take costs out of the business. The success of our combined efforts contributed to a 10% increase in our quarterly gross profit margin. In addition, the first quarter benefit for an 18% year-over-year decrease in G&A expenses, primarily due to lower legal costs. We continue to focus on ways to improve margins and deliver consistent profitability as we focus on improving the pricing environment and gaining market share in the basins where we operate. While improved seasonal conditions benefited from our frac-water heating services business in the first quarter, this has not overshadowed another key highlight of the first quarter, that being the announcement, our intention to complete the acquisition of Buckshot Trucking by the end of next month. As we discussed in our last call, our focus on deleveraging the balance sheet and improving market share and margins in the basins in which we operate has enabled us to begin the growth phase of the company's turnaround. We view Buckshot as a great first step in transitioning the company towards a more consistent cash flow generator. As important, we believe adding Buckshot to our existing business will prove transformational as it helps us transition away from our primarily seasonal business subject to commodity risk to a logistics business that generates strong year-round cash flow with significant growth prospects. I would note the transition will not require substantial new overhead or capital. So with that, I'm going to have Mark take you through some of the quarterly numbers before I provide a few closing statements. Mark.
Mark Patterson: Thanks, Rich. Our first quarter 2024 heating season saw a surge in cold days in January within both Pennsylvania and Colorado regions. These cold blasts primarily impacted our completion services. As Rich mentioned, our seasonal focused frac water heating business enjoyed solid growth from 2023 that was mostly driven by increased activity levels and pricing adjustments in our Colorado and Pennsylvania operations. On the production segment side, our hot oil and acidizing operations saw a bit of weakness in demand that we view as temporary and mostly driven by some decreased demand for our acidizing services. The net result was first quarter 2024 revenue of $9.8 million that was 10% higher than the first quarter of 2023. On a segment basis, production services revenue was lower at $2.5 million compared to $2.9 million a year ago. First quarter 2024 completion services revenue increased to $7.3 million from $6 million in 2023. First quarter adjusted EBITDA came in at $2.2 million compared to $1 million in the first quarter of 2023, a year-over-year improvement of 125%. Net income in the first quarter was $0.8 million or $0.03 per diluted share, versus a net loss of $1 million or $0.07 per diluted share in the same quarter last year. We remain focused on right-sizing our business and continue to evaluate and execute opportunities to reduce cost across the business. As we've discussed in the past, we've seen significant decline in our S&A expenses over the past couple of years, and we're getting closer to our internal growth with annual S&A run rate of $3.6 million. That excludes some one-time legal and non-cash expenses such as stock compensation expense. I would like to remind our shareholders that the previously filed class action lawsuit was dismissed and plaintiff's counsel has indicated there'll be no further appeals. As you know, cost of that defense was significant over the past year. Turning to the balance sheet in 2023, we made material progress in reducing our debt levels. We remain focused on improving the financial position of the company, including further reducing our overall reliance on season-focused business activities. The buckshot acquisition clearly places us on the right path, and we'll look for additional accretive opportunities that enhance the balance sheet to increase year-round cash flow, visibility, and provide incremental opportunities for profitable growth. So with that, I'll turn the call back over to Rich.
Rich Murphy: Thank you, Mark. The strategic actions we took in 2023 placed us in a much better position as we moved into 2024. Further supported by a strong heating season in the first quarter and the related positive impact of our frac-water heating services business, we posted material financial improvement year-over-year, and we continue to have a solid outlook, not only on the completion service side of the business, but also in our production services segment. We base our view on customer feedback, which points to further demand growth for our services. Combined with our strategic efforts over the past year to right-side the business, further rationalize the position of our assets and enhance our financial position, we feel we are in good position to meet increased demand. We enjoyed the solid start to 2024, and we really appreciate our team's efforts to allow us to capitalize on the solid market conditions presented in the first quarter. However, we continue to recognize the importance of moving our overall business away from the over reliance on cold weather conditions that occur substantially during the first and fourth quarters of the year. In short, we clearly recognize the importance of adding a non-seasonal business portfolio with greater growth potential and synergies that our current service offerings do not offer. As mentioned in my beginning comments, we previously announced the acquisition of Buckshot as being truly transformative for Enservco [ph] and its shareholders. In short, Buckshot provides a strong complement to our current service offerings with the added benefit of not being winter weather dependent. Buckshot will also provide a substantial improvement in operational and financial visibility, which benefits our business shareholders and other stakeholders. We are targeting to close the transaction by end of June and are currently evaluating financial alternatives for the transaction. We look forward to evaluating and executing additional opportunities that further evolve our business away from seasonal to a more year-round business activity to drive long-term cash flow generation, profitability, and shareholder value. In conclusion, we remain focused on executing our multi-faceted plan to optimize our operations and build a more substantial business model with reduced debt. Supporting our efforts is the continued strength of our current operations. In addition, we look forward to completing the Buckshot acquisition and quickly integrating their team's assets and operations into our broader business. Finally, we will continue to evaluate opportunities to further visibility and enhance financial performance for the benefit of the company and its shareholders. With that, thanks again for joining us on the call today. We will now be happy to take any questions. Operator.
Operator: Thank you. At this time, we'll be conducting a question and answer session. [Operator Instructions] We do have a question come in today. The first question is coming from Jeff Grampp from Alliance Global Partners (NYSE:GLP). Jeff, your line is live.
Jeff Grampp: Good morning, guys. Couple of questions on production services for you, Rich. I know you guys commented that acidizing was a little bit weaker. Revenue is still up sequentially, though, but I'm just kind of curious how you guys have kind of handicapped future performance there. Is this kind of a steadier state where Q1 was at, or can you get back to some of the more revenue levels from last year where you were pushing past $3 million a quarter or so from that segment?
Rich Murphy: Yes, I think the way to think about our hot oil business predominantly is in Texas. I'd say 85% to 90% of our assets are in Texas, in the southwest basins of Georgia to Carrizo. They had some acid weakness in November and December, which is somewhat seasonal, and then it carried over to January. But in general, I would look at that business as a $3 million revenue business pretty consistently. We're back to that trend rate, and it's basically a nice cash flow generator, and the assets stuff will be a little more up and down at times, and we just had a slight downtick. And the other 10%, I will say on the upside of the hot oil, we have started hot oil efforts in Pennsylvania, which is starting to gain traction, and the rates there are 2 to 2.5x what they are in Texas. The consistency of that work is not what it is in Texas, so we're not going to have as big of a fleet. We're never going to have a huge fleet there, but it is very high margin. So that's the -- I think, again, $3 million revenue business is probably a good number.
Jeff Grampp: Okay, great. And then on the margin side, even though the revenue was down a bit year-over-year, you guys still have some nice margin performance there. Is some of that maybe Pennsylvania contribution that you just mentioned Rich, or how are you guys kind of seeing the margin progression of that business?
Rich Murphy: On the production side, it's just priced primarily with a little uptick from Pennsylvania. That's kind of the mix. I'd say about 80% is probably just priced in our Texas base, and then 20% is the kick in from Pennsylvania, which is much higher margin. And we will continue to see that probably going forward. We have a very strong market share position in those basins, and we're going to continue to push prices. It's not a huge cost to our customers for the service we provide, so I think there is more opportunity there.
Jeff Grampp: Okay, great. And on the acquisition side, and you mentioned you looked to close this in another month or two. Can you kind of connect the dots for us as kind of the next steps? You have the vote and financing. Does one necessarily need to come before the other, or just any kind of guidance or color you can give as to how you see the next couple of months playing out?
Rich Murphy: Yes, there'll be -- we need a shareholder vote to approve, because it's a $5 million transaction as we noted, $1.25, it is going to be equity that Buckshot owners are going to take, and then $3.75 is cash. And so we'll get the -- we have to obviously put our proxy out. That's our shareholders' meeting which aimed for that at the end of June, early July. And then as soon as that happens, we should be able to close. We may fund sooner than that and just wait for the vote with -- if the vote doesn't go through -- the deal wouldn't go through, but obviously just to be clear, the vote requires 50% of a quorum, and it's the largest shareholder I'll be voting for other insiders. So we basically have the vote, so we're pretty confident that this thing will close in early July. The financing is not going to be that difficult. We're already going down that route.
Jeff Grampp: Okay, great. Best of luck and we'll stay tuned. Thanks Rich.
Rich Murphy: Thanks Jeff.
Operator: Thank you. [Operator Instructions] And there are no other questions from the lines at this time. I will now hand the call back to Rich Murphy for closing remarks.
Rich Murphy: Well, I just want to -- on behalf of myself, a large shareholder and everyone on the call, also the shareholders, it's been a long road to get from our $36 million in debt to where we are today. And I appreciate all the patience, but we are really -- in fact, jumping the seat in September of 2020, I can't think of a better position that this company's been in since then. So, I'm really looking forward to closing the buckshot deal and then transforming this business to an energy logistics company and being a dominant player in that space. So I appreciate all your patience and look forward to updating you on the progress of that as we move forward. Thanks again.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.
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