Enservco Corporation

Good day, ladies and gentlemen, and welcome to the InserveCo's second quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jay Pfeiffer. Sir, the floor is yours.

Hello, and welcome to InserveCo's 2021 second quarter conference call. Presenting on behalf of the company today are Rich Murphy Executive Chairman Marjorie Hargrave, President and CFO. As a reminder, matters discussed during this call may include forward-looking statements that are based on management's estimates, projections, and assumptions as of today's date and are subject to risks and uncertainties disclosed in the company's most recent 10-K, as well as other filings with the SEC. 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. And Servco 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 Reg FD, which prohibits selective disclosure of material non-public information. A webcast replay of today's call will be available at inservco.com. after the call in addition a telephone replay will be available beginning approximately two hours after the call instructions for accessing the webcast or replay are available in today's news release with that i'll turn the call over to rich murphy rich please go ahead thanks jay welcome everyone and thanks for joining our call today we announced our second quarter of financial results after the market closed the highlights were one

a return to year-over-year revenue growth, and two, solid improvement in our profit metrics. On the revenue side, I credit our sales team and field personnel who have worked extremely hard on customer acquisition and retention efforts under incredibly challenging conditions during the pandemic. On the profit side, there were many factors at play. Chief among them, a sharp focus on cost cutting that has positioned us as a much leaner organization capable of generating improved gross and net margins as we scale the business. Total revenue in the second quarter increased 44%, driven by stable to rising commodity prices and a steadily increasing U.S. rig count. We experienced an uptick in customer activity in the majority of our operating areas and achieved year-over-year revenue increases in all three of our core service areas, track water heating, hot oiling, and acidizing. We also achieved good growth in our non-oil field service area, and based on recent customer commitments, expect that trend to continue in the second half of the year. The biggest driver of revenue growth was our hot oiling business, which grew 58% year over year based on renewed activity in North Dakota and Pennsylvania, and continued momentum in South Texas, where our Jordanton yard has our largest concentration of hot oilers to serve a growing customer base there. As we told you last quarter, we are also moving aggressively to meet demand for our hot oiling services in East Texas and recently opened a new yard in Longview to serve new customers in the Haynesville Shale and other fields in the Arkansas, Louisiana, and Texas region. You may recall that in March of this year, we kicked off a $400,000 CapEx program to refresh our hot oiling fleet. Before we're done, we think the investment will be closer to $480,000, but it will be worth every penny because the demand is there for hot oiling. Unlike frack water heating, it is a more non-seasonal business that can contribute revenue and profit on a year-round basis. The CapEx program is scheduled to conclude in the September-October time frame. As I said earlier, we enjoyed year-over-year growth in all revenue categories in Q2. Crack water heating grew 2%, while acidizing grew 191%, which is a good sign in that acidizing is an expensive undertaking for EMPs, and the increased activity could be viewed as a bullish sign that capital budgets are loosening up. And lastly, our non-oil field services revenue more than doubled in the quarter, reflecting our focus on augmenting traditional revenue streams while keeping our personnel and equipment working. On the topic of ancillary services, we continue to look at potential M&A transactions that can add profitable revenue streams. Anything we would do in this area would likely be small, EBITDA-positive tuck-in transactions that would add complementary and preferably non-seasonal services to our mix. The increased revenue in the second quarter contributed to a 63% improvement in our net loss and a 24% improvement in adjusted EBITDA loss. As I mentioned, our lower cost structure is playing a big part in this, but our bottom line is also benefiting from the effects of our bank refinancing and the impact of the CARES Act tax credits, which Margie will get into in more detail in just a minute. So to recap, we're pleased with our second quarter performance. As you know, Q2 and Q3 are our slower off-season quarters that generate considerably less revenue and profit than the fourth and first quarters that constitute our heating season. That said, however, it is nice to return to year-over-year growth mode, and we're working very hard to maintain our momentum in the current third quarter and carry it into what we hope will be a very productive heating season commencing in September. Unlike where we were at this time a year ago, we are now buoyed by a much stronger balance sheet. following a transformational debt refinancing, as well as two equity infusions that have put us in the strongest financial condition we've been in some time. One more comment on our debt refinancing. As you know, our bank became a large equity stakeholder in the company as part of the refinancing, and we enjoy a good relationship with them. Our note matures in October 2022. We expect to address our options later this year, early 2022, after we get a feel for how strong our upcoming heating season is. We're excited by our year-over-year revenue growth and hope to maintain that momentum in Q3, and particularly in our Q4 and Q1 heating season, when we traditionally generate the majority of our revenue and profit. Accordingly, we think it's prudent to wait a few quarters before we address the debt refi. With that, I'll turn the call over to Margie to recap financial results. Margie?