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Edited Transcript of AETI earnings conference call or presentation 8-Aug-17 3:00pm GMT

Thomson Reuters StreetEvents

Q2 2017 American Electric Technologies Inc Earnings Call

HOUSTON Aug 16, 2017 (Thomson StreetEvents) -- Edited Transcript of American Electric Technologies Inc earnings conference call or presentation Tuesday, August 8, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Charles M. Dauber

American Electric Technologies, Inc - CEO, President and Director

* William Brod

American Electric Technologies, Inc - CFO, SVP and Secretary

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Conference Call Participants

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* George Berman

* William J. Dezellem

Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer

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Presentation

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Operator [1]

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Good day, and welcome to the American Electric Technologies to report Second Quarter 2017 Conference Call. Today's conference is being recorded.

This press release contains forward-looking statements as defined in Section 27A of the Securities Exchange Act of 1934 concerning anticipated future domestic and the international demand for our products and other future plans and objectives. While this company believes that such forward-looking statements are based on reasonable assumptions, there can be no assurance that such future revenues, profits, plans and objectives will be achieved on the schedule or in the amounts indicated. Investors are cautioned that these forward-looking statements are not guarantees of future performance. Actual events or results may differ from the company's expectations and are subject to various risks and uncertainties, including those listed on Item 1A of the Form 10-K filed with the Securities and Exchange Commission on March 30, 2017. The company assumes no obligations to publicly update or revise its forward-looking statements, even if experience or future events, make it clear that any of the projected results expressed or implied herein will be realized.

At this time, I would like to turn the conference over to Mr. Charles Dauber, President and Chief Executive Officer of American Electric Technologies. Please go ahead, sir.

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [2]

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Thank you. Good morning, everyone. I'd like to welcome you all to the American Electric Technologies Second Quarter 2017 Earnings Call. Joining me today is our Senior Vice President and Chief Financial Officer, Bill Brod.

For our call today, I'm going to start with a review of our second quarter results. Bill will walk you through some additional financial details, and I'll come back and share my thoughts on where we are half way through the year. We'll then move to a question-and-answer session coordinated by the moderator.

As you all saw from our earnings release this morning, AETI announced revenue for the quarter of $13 million, up 61% from the $8 million reported in Q1 2017, and up 13% compared with Q2 last year. This quarterly revenue increase was primarily driven by growth in the oil and gas sector, which saw a revenue growth of 169% to $10.3 million. The majority of the oil and gas sector growth came from previously reported backlog in our technical products operation but the company also saw recovery in its M&I Electric Brazil business in the quarter as well. Gross margins for the quarter were up $1.4 million from Q1, but down $410,000 from Q2 last year. Due primarily to market pricing pressures in the U.S. oil and gas markets that we've previously discussed.

I'll discuss the components of the revenue later when I get into our sector reviews. Based on the increased revenue and gross margins, the company saw $1.4 million improvement including quarterly operating results versus Q1. EBITDA, a non-U. S. GAAP measure improved to a loss of $693,000 from a loss of $2.1 million in Q1, but was down from a gain of $500,000 in Q2 last year, which was helped by onetime gains of approximately $400,000.

The company reported quarter ending backlog of $22.7 million, which was down $3.9 million from the end of Q1. But that quarter ending backlog number does not include the $4 million West Texas pipeline project award that we received during the first week of July.

With that, I'll now turn the call over to Bill Brod for more financial details, and will come back after with more comments on our business.

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William Brod, American Electric Technologies, Inc - CFO, SVP and Secretary [3]

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Thanks, Charles. Good morning, everyone. The company reported a fully diluted loss from operations per share at $0.13 for the second quarter compared to a fully diluted loss of $0.31 per share in the first quarter of 2017, an improvement of $0.17 per share but down from the fully diluted earnings of $0.01 per share reported in the second quarter 2016. The company reported a net loss of $1.1 million for Q2, an improvement of $1.5 million compared with the net loss of $2.6 million in Q1 of this year, but down from $0.1 million Q2 of 2016.

I will note that in Q2 of 2016, EBITDA and net income were favorably impacted by several onetime gains during that quarter. Consistent with last quarter, our quarterly fixed cost continue to run in the $3 million to $3.5 million range, which suggest we need to be in the $50 million to $60 million annualized run rate of revenue -- of the revenue mix to be profitable.

Moving to the balance sheet. We ended the quarter with a cash position of $3.2 million, up from $1.6 million at the end of the first quarter, total debt at the end of the quarter was $6.4 million in comparison to $6.7 million at the end of Q1. Working capital at the end of Q2 was $2.8 million, compared with $3.5 million at the end of the first quarter. During the quarter, we received our annual dividend of $780,000 from our BOMAY joint venture in China. We paid down our U.S. credit facility by $0.5 million, and we secured a $300,000 direct credit facility to accommodate the growth at our wholly-owned subsidiary in Brazil.

As discussed last quarter, in March, we closed a debt refinancing with HDC that refinanced our existing working capital facility, and provided the company with incremental liquidity as our working capital needs continue to grow. The company disclosed in its 8-K filing last week that relative to this financing with HDC, we had entered into a repricing agreement with the holder of the Series A Convertible Preferred Stock and related common stock purchase warrants, which were originally issued back in 2012.

With that, I will turn it back over to Charles for some additional commentary and outlook on the business.

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [4]

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Thanks, Bill. I'm going to begin with the sector review starting with the oil and gas market sector. As we previously reported, the majority of our focus here is in the midstream and the downstream portions of the oil and gas sector. The higher oil and gas market remains very challenging with strong competitive pricing pressure across the entire sector. As I mentioned earlier, revenue for the oil and gas sector in Q2 was up 169% to $10.5 million, up from $3.9 million reported in Q1. Quarter ending backlog for the sector was $17.8 million, down 17% from Q1, but that didn't include the $4 million West Texas pipeline project that we reported at the close of the first week in July.

For our joint venture, BOMAY in China, which is all focused on oil and gas. BOMAY had revenues of $6.9 million in the quarter and we recognized 40% of their profits as equity income, which was approximately $100,000. We expect BOMAY to continue at their reduced run rate given the Chinese energy market environment through this year. Our Singapore joint venture is still in hibernation mode while the oil and gas market downturn in Southeast Asia continues.

Moving to power generation, the power generation distribution sector had revenues in Q2, of $1.3 million down from the $2.8 million in Q1, and down 68% from Q2 last year. Power generation is a critical part of the company's strategy and based on additional orders booked in Q2 with the backlog increased to $4.4 million. We feel positive about the market opportunities in the sector and see ample opportunities for additional projects bookings this year.

Moving to Marine and other industrial sector. Revenues were $1.2 million down 9% from Q1 and down 32% from Q2 last year. Primarily due to reduced backlog for a marine and industrial products-oriented projects. We did see some recovery in our U.S. industrial services business but the Marine services part of the market is still very weak globally due to a significant oversupply offshore service and other offshore related vessels.

I'd like to move to discuss M&I Electric Brazil, M&I Electric Brazil's revenues was a split between the 3 sectors that we talked about between oil and gas, and power generation, and marine and industrial. In Q2, revenues for the Brazil operation grew to $1.3 million, up 10% from Q1, and up 11% from Q2 last year. We continue to see opportunities for M&I in the oil and gas, and power gen markets, and are now seeing a growing number of projects in the industrial and energy power sector.

After the new Sales Manager from GE, that we hired in February came on board and is ramping up. After the end of the quarter, we announced a large break in project award with the Brazilian multinational company and the opening of our office in Belo Horizonte, Brazil. While we are concerned about the Brazilian macroeconomic environment, we're positive about the progress of team is making in Brazil, and I look forward to sharing additional announcement with you in the future.

If I take a step back in somewhere as where we are as a company. We've proven our ability to execute in our target midstream, downstream and power generation markets in a very tough market environment. And on our investments in new products, capacity and people have resulted in significant backlog and revenue growth. Our services business including Brazil are showing signs of growth, and we expect to share more progress in upcoming earnings calls on that.

Although our market remained very challenging, we need to continue to book orders and execute our backlog to keep our customers happy and become profitable. You can see from our Q1 to Q2 numbers where we saw $5 million increase in the revenue, that, that increased to our bottom line by about $1.4 million, meaning roughly between 20% and 30% of every dollar we recognize goes to the bottom line.

Before we proceed with the Q&A session. I'd like to conclude the prepared portion of my comments by thanking our employees for their hard work and thank our customers and shareholders for their support.

This concludes the prepared portion of my comments, and I'll now turn the call over to Savannah for the Q&A section of the call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we can take our first question from Bill Dezellem.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [2]

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Couple of questions. First of all, you've mentioned that you have power gen opportunities in the second half of the year to book new business. Do those projects that you're in contact with tend to be larger in size than the average project that you have historically booked. And how would you characterize those, please?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [3]

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So it's actually a mix, our power gen business is divided into 2 different categories. One is, we work with OEMs of power generation equipment, large multinationals that make turbines or gen sets and they use our electrical equipment as part of their turnkey solutions. And the other part of our power generation business is the projects where we work with an engineering procurement and construction firm which is already building a power plant. So the guys that are building the power plants, those opportunities are out there, those tend to be larger projects, $3 million, $5 million, $7 million projects. While the other projects that we work on, which is the -- working with the power generation equipment guys tend to be smaller, those could be in the hundred of thousands of dollars up to $1 million or $2 million, but there tends to be a lot more of them, when a big turbine company sells turbine that tend to sell it a bunch at a time. So it's not a -- I think, the size will be varied based on sort of how things go. But I hope that answers your question.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [4]

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That does. I'm going to take a step further though, Charles. In terms of the reference that you made to opportunities in the second half, does that split both the -- both of those sides of the equation that you just described?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [5]

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Yes.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [6]

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Great. And then let's talk about pricing for a moment. What's happening in general with pricing over the last 3 months and 6 months. And I recognize that it's a pretty short time period but I'm trying to understand the recent trajectory?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [7]

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I would tell you in the majority of the midstream and downstream markets where pricing started to tighten up about a year ago, actually about a year ago. And I don't think we've seen significant price decline since then. So that's how I would sort of think about that the prices have sort of held steady at that pricing point. The market is very tough and there's a number of competitors in the market. As we continue to work with larger companies, what I think is happening is that some of the traditional suppliers are under attack. So if you listen to earnings calls from some of our competitors, we are taking market share from traditional suppliers in the market. Because we've got this unique position of -- we've build the customer equipment, we have the arc-resistant switchgear and we put it all in a power distribution center that we make ourselves. So I think people recognize us for that and I think that they're trying to be aggressive and make sure that they maintain market share but all of this is against the market that it's still not booming by any sense. Okay?

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [8]

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And in the upstream market, you did not make any reference to that market. But we have seen drilling activity pickup markedly this year. What's your view of the service and replacement not the original new build side but really ongoing maintenance side of that market, both in terms of an activity level, and in terms of pricing?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [9]

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So the upstream market you have it exactly right, we're not talking at all about new builds at this point, we've gotten quotes and we see opportunities, not a lot is happening. What most of what's happening certainly in the Permian is customers are taking the drilling rigs that have been stopped or stopped for several years and just trying to put them back to work. So we actually do have a variety of service customers that's part of the service growth that we talked about. That are deploying our resources to get their rig back up and running and that's actually -- that's increasing part of our business, at this point it's not a material part of our business, which is why I didn't cover it. And the pricing for the services for that is fine, it's traditional levels so we're not seeing any price degradation in terms of the upgrades and whatnot in that particular market they've -- if the drilling contractors have a project they need to deploy, they need to deploy it and they trust us to do a good job on that. So that's the growing part of our business, it's one of the reason that we hired Doug Williams, 3 quarters ago, out of NOV and Schlumberger/OMRON was to go build that business up for us. And that's where we've seen increasing amount of opportunities is, I think, we're calling on these customers again and they have projects again.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [10]

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And Charles, are you sensing that these drillers are actually buying -- are either buying or close to buying replacement parts as opposed to simply cannibalizing stacked rigs. Where do you feel like we're at in that process?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [11]

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Yes. They are already started, they have already started. They started cannibalizing the rigs but usually they have to borrow replacement parts depending on what they find. So we're seeing opportunities for selling replacement parts and small upgrades and things like that right now.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [12]

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That's great. And then finally, I would like to jump to Brazil, and you did make some general comments in your opening remarks. I'm hoping that you would dive into some more detail in terms of what you're seeing there, both in terms of the business activity from the oil and gas sector, but then the counter with the political upheaval there?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [13]

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We have an assumption for the business that as we headed into 2017, that the economy couldn't get worse and the political situation in Brazil couldn't get worse but actually it did. And when the sitting President is accused of corruption, that's never good for an economy. So all the Brazil business is sort of in a phase of a situation which is even tougher than the United States. So I'll give the team down there actually a lot of credit from a growth perspective that we're still growing in the teeth of a very, very, very challenging economic environment. For oil and gas, I would tell you it is stable, Petrobras is stable, the drillers that are there are stable. Most of the business in Brazil from an oil and gas is offshore production. And those are -- that's relatively stable in terms of our customers and we've got 75% market share something like that with those guys. As you mentioned, we have been pushing for the last 12 months, into the non-oil and gas market just like we did in the U.S. So we started with power generation. We've been penetrating the power plants one by one. And then with the hiring of Marcelo Montiero, from General Electric, we've spent a lot of 6 months strongly pursuing the -- what we call the industrial and energy market. So that's mining, minerals, manufacturing and other industrial applications, which Brazil still is famous for. We spent basically Q1, getting on the approved suppliers list for a variety of very large companies and then we've been bidding projects and then that obviously came to fruition with our first large project award. I don't think we, I don't know if we provided the value of that project or not but anyways our first large project award in Brazil with a very, very famous Brazilian multinational which is our break-in win for them and a very large project opportunities for our Brazilian team in that market. So obviously, we see lots of more opportunities for that in the industrial and energy business and we've just got to stay aggressive and keep making more customers happy to keep building that business.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [14]

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And is it your sense that, that particular customer in Brazil and others that you are anticipating getting on their approved supplier list that those will be needle movers from an overall, American electric perspective or simply -- and I don't mean to downplay it but simply, needle movers from the perspective of that country?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [15]

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Certainly, in perspective of that country they will help with our -- the overall organization because incremental service revenue has nice high margins on it. And so service revenue margins are significantly better than sort of the traditional product margins. And as we start aggregating multiple of these projects on top of each other. Yes it does get meaningful overall for the entire company.

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Operator [16]

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(Operator Instructions) And we do have a follow-up from Bill.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [17]

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Charles, I actually want to circle back if I may to U.S. drilling market, and the services side of the equation. What's your view of how long before that business becomes meaningful for you? And is it fair to say that is not a backlog business, it really is a phone call, you go out and work or it's a phone call and you send parts out?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [18]

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Okay, so the first part was the drilling, how long until the drilling services is meaningful to the organization? Is that the question, Bill?

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [19]

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Correct, yes.

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [20]

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You know it's interesting, the answer is sort of similar to the Brazil question, I think the drilling projects that we see in terms of upgrades. If it's just a couple of guys going out and doing some electrical service that's not a material level project, that will take a long time. But what you get is, you get a bunch of service people doing a bunch of things and those guys tend to then pull along upgrade projects. So maybe it's $100,000 of service and then they pull along $0.5 million of upgrade or other pieces of things that needed to do, then it starts getting interesting for us as you multiply it out. So there's no -- there's very few multimillion dollar upgrade projects. There are more $0.5 million, that's sort of size, $0.5 million to $1 million including hardware -- including the product and services. So again the margins on those tend to be better than if you're selling to a brand-new mid stream company all at the same time. We just are focusing on -- we're pushing for those as best as we can, we just don't see as many as we would like at this time in the U.S. market in terms of the upgrades, service yes, upgrades not necessarily at that level. In terms of the backlog, same discussion if it's just doing service, it's a call-out type thing. They'll call us and it's not like they call us and they want us to be there in the next morning, but they call us and we need to make them a proposal, would be there in couple of weeks depending on what their schedule is, a week or two. But if it's an upgrade and there's products to go along with it then it's a combination of services and backlog and from the product side perspective, but again, not a meaningful number at this stage.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [21]

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And expose my ignorance here but with the energy market, and the bounce back in the number of rigs drilling, is that enough now for you to see some meaningful refurb and service activity. I know you kind of touched on this a little bit before, but I'm just trying to figure out where we're at in that transition?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [22]

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Yes, what I would say is that the number of service opportunities we've got that we're chasing, a number of servicing opportunities we've got that the teams work on is dramatically different now than it was a 2 quarters ago. And so yes, there's a significant increase. From a overall, move the needle for the company, back to your question earlier, we're still aways from that.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [23]

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Great. And I'm going to ask one more question to put you on the spot. Would you anticipate third quarter ending backlog to be greater than Q2 ending backlog?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [24]

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Well, I will give my standard answer, which is, we don't necessarily do guidance on things like forward-looking numbers. What I will just say is that the team feels confident that we've got lots of good stuff to book. And we think that we've got the right solutions and products and pricing and all those sort of things. And obviously, we want to continue to book business because every dollar that we bring in is a nice portion that goes straight to the bottom line.

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Operator [25]

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(Operator Instructions) We can go next to George Berman.

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George Berman, [26]

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I might have missed it that out of the sales that you reported of $12.9 million, how much of that was Brazil?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [27]

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Brazil had revenue in Q2, of $1.3 million.

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George Berman, [28]

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Okay. And that situation seems to be growing pretty decently and that's now a 100% owned so it's fully reported. Whereas the Chinese revenues are not the part of your revenue number, right?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [29]

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That's exactly right, George. When -- our Brazil operation is 100% wholly-owned subsidiary, the Chinese joint venture BOMAY, we are 40% owner of that joint venture along with our partner China National Petroleum Company who's the majority owner.

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George Berman, [30]

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Okay, I've got a couple of questions. There are some massive projects along the Gulf Coast being build in the chemical plant situation various other reflecting operations. Would you see any opportunities there to gain some sort of the market acceptance. And the second question, is south of the border, since the PEMEX, Mexican National Oil Company has been sort of more or less somewhat privatized to have let some leases out in the Gulf of Mexico, that has been very well-received for shallow water as well as deep water and understand even some on land. Would you see possibilities there in increased activity since now a lot of U.S.-based companies are part of drilling activity on an offshore area?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [31]

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That was a lot of stuff there, let me just -- let me -- I'll be taking one at a time. So yes, so the first thing is that the -- you asked about the increase in large projects announced primarily in the chemical type industry, like the natural gas type projects along the Gulf Coast and what I tell you is, that is exactly what we are doing. That's exactly what the company is aligned to go do. The opportunity that we have that we make this arc-resistant switchgear, our IntelliSafe product, which is considered to be the most fully featured product on the market. And we build the power distribution center, this big metal building that the -- all the electrical equipment goes into, we're one of the only 2 companies that do that on the entire -- basically in the entire industry but certainly in the Gulf Coast. So these projects are being built in our backyard, by customers that are within 30 miles from where I'm sitting right now, and these are all the engineering, procurement and construction firms that we've been penetrating over the last several years. So we're very well-positioned for those, the teams that are involved in the feed stage work with them. And we're on the approved suppliers list and that's exactly why we're positioned significantly taking a large bite out of some of those large projects. So yes, it's answer to the first one.

Second is regarding Mexico, actually the answer is very similar as it turns out, which is, in the Mexico there's a variety of different projects where the oil and gas offshore or actually there's an increased demand of power gen that looks like it's coming to Mexico as well as part of this privatization efforts. And with the same companies that we work with on the oil and gas projects, the EPC's or the upstream guys, those will the people that will take us to Mexico. And the same with the power generation folks whether it's the OEMs that are building the power generation equipment, they'll pull us along with the projects down there and we work with EPC firms who are looking at building power plants in Mexico as well. So our position with the solutions that we have, the penetration on these customers that they going to own these projects make us well-positioned for both the large chemical industrial type projects on the Gulf Coast and certainly for Mexico as well.

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George Berman, [32]

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Okay. Well that -- it sounds pretty encouraging. We just need to get our gross margins back out to halfway decent standards and the company starts showing profits?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [33]

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Yes. The part that's interesting about the gross margins is that our fixed costs are basically flat, all right? And this is really is a revenue discussion, we've got a good enough direct margins into the system to cover those fixed costs and we start to really generate some profits. So you can do the math and you can see sort of the increases as we even in the face in this market, as we increase revenue a nice portion still comes directly to the bottom line. We've got a key point.

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George Berman, [34]

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Right. And the recent refinancing off your various credit lines seems to have put you into a halfway decent position on the working capital as well, would that be correct as to say?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [35]

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Yes. I think we're -- I think, we feel like some of our cash challenges are behind us, I think the teams has done a good job managing through that and with the refinancing that we did and everything we've done with hunting dog and the preferred shareholder, we think we're on a good position in working capital perspective going forward.

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George Berman, [36]

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Yes. Speaking of the preferred shareholders, you announced yesterday that you revise some of the conversion that was there, could you comment a little bit on that, on why that was done? And how that was done for the benefit of all the AETI shareholders and going forward?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [37]

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Sure. You know so let me just take a step back, and if you remember, that we've been talking for a while. We think the company is executing on our strategy and we're doing the right things in a tough market. But we needed to refinance our line with the bank and we didn't want to do a full equity raise and have a dilution for the company back at the beginning of the year. So we found hunting dog, which is HDC, it's a great lender who specializes in working with companies just like us. As the condition of them doing financing, they required our preferred shareholder to agree to a standstill and that standstill is basically that they agree do not exercise their existing right to convert their preferred stock into a note payable in cash over a 36 months period. That would have start in April, okay. So this financing and standstill is around that, that arms length negotiation happened between AETI and the shareholder, and that consideration for basically not starting to pay cash starting in April is what that the thing is all about. Okay. Work is still good on the backside.

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George Berman, [38]

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Understood. One last question. There has been some activity in the Far East where obviously they have cut production, all production a little bit there. But there seems to be a lot of activity ongoing and I remember years back you guys had some presence in Saudi Arabia, Dubai, Abu Dhabi, et cetera. Are you rekindling, I mean, any of those relationships there or there any demands for your product out in the Far East?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [39]

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So -- that's a great question. So we -- when we brought Doug Williams back into the company that's one of those things as to rekindle those relationships with our partners in the Middle East. We've had a -- we have a good install base of customers in the region. We have a partner in Dubai, that we've been working with for number of years and things just basically settled down. But similar to what we talked about earlier in terms of the U.S. drilling opportunities, we have started to see increased amount of service opportunities at the Middle East as well. Not a lot of new build still as rigs are coming back from being unstacked, but more service opportunities. So yes, we do see opportunities in the Middle East which we've to go figure how to -- what's the right engagement model and where do we put our resources model and sort of things where changes are done. Yes, we're starting to see some incremental opportunities out of the Middle East and we'd -- we'll keep you apprised as things progress there.

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Operator [40]

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(Operator Instructions) And it appears we have no further questions at this time.

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [41]

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Okay. Thank you all. We'll talk to you again next quarter.

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Operator [42]

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And this does conclude today's call. Thank you for your participation, you may disconnect at any time and have a great day.