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Edited Transcript of AETI earnings conference call or presentation 28-Mar-17 2:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 American Electric Technologies Inc Earnings Call

HOUSTON Mar 28, 2017 (Thomson StreetEvents) -- Edited Transcript of American Electric Technologies Inc earnings conference call or presentation Tuesday, March 28, 2017 at 2:00:00pm 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 and SVP

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Conference Call Participants

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* 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, everyone.

This press release contains forward-looking statements as defined in Section 27A of the Securities Exchange Act of 1934 concerning anticipated future domestic and international demand for our products and other future plans and objectives. While the company believes that such forward-looking statements are based on reasonable assumptions, there can be no assurance that such future revenues, profits, and plans and objectives will be achieved on 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 in Item 1A of the Form 10-K filed with the Securities and Exchange Commission on March 30, 2015. The company assumes no obligation 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 not be realized.

At this time, I would like to turn the conference over to Mr. Charles Dauber, President and Chief Executive Officer of AETI. 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, Lexi. Good morning, everyone. I'd like to welcome you all to the American Electric Technologies fourth quarter and fiscal year 2016 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 fourth quarter results. Bill will then walk you through some additional financial details, and then I'll come back and share with you my thoughts on where we are so far in 2017. We'll then move to a question-and-answer session coordinated by the moderator.

As you all saw from the earnings announcement this morning, AETI reported consolidated revenues in Q4 of $9.4 million, which was up 22% versus Q4 last year and up 8% from last quarter. As we've discussed previously, we believe 2016 was a critical year for the company as our investments from 2014 and 2015 in the products like our IntelliSafe arc-resistant switchgear and our sales focus on the Engineering Procurement and Construction market and Power Generation markets are now paying off with significant project awards with new customers and a growing backlog.

In Q4, the company saw the backlog continue to increase, reporting quarter ending backlog of $13.5 million, which was up 24% from the $10.9 million at the end of Q3 and is actually the highest quarter ending backlog since Q1 of 2016.

For the year, revenue from our power generation business was up 230% versus 2015, and our marine and industrial business was up 42% year-over-year. Unfortunately, those were not enough to offset the 55% reduction in the company's oil- and gas-related business and for the full year, the company reported revenues of $37.8 million dollars, down 23% from $49 million we reported in 2015.

I'll discuss more details about our market sectors in my comments later on this call. I'm also pleased that we reported earlier this week that we closed on a new $7 million credit facility, which we'll use to refinancing existing debt and for general corporate purposes. Debt financing was to support our growth plans, and I will let Bill comment on that in further detail.

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

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

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Thanks, Charles. Good morning. The company reported a fully diluted loss per share of $0.21 for the fourth quarter compared to a fully diluted loss of $0.33 per share in the third quarter of 2016 and compared to a fully diluted loss of $0.45 per share reported in the fourth quarter of 2015. Earnings per share for the year was a loss of $0.89 compared with a loss of $0.62 in 2015.

The company reported a reduced EBITDA loss of $1.4 million for the fourth quarter compared with an EBITDA loss of $2.3 million in the third quarter of 2016 and $2.8 million in the fourth quarter of 2015.

Moving to the balance sheet. We ended the quarter with a cash position of $1.6 million and had $5.7 million of total debt at the end of the year. Working capital at the end of Q4 was $3.3 million compared with $5.7 million at the end of the third quarter.

As Charles mentioned, we filed an 8-K disclosure yesterday announcing our closing on a new $7 million credit facility with Hunting Dog Capital out of San Francisco. This financing allowed us to refinance all of our existing bank debt along with providing approximately $1 million of working capital. This new credit facility has an 11.5% fixed coupon rate and the loan has a 4-year term, and we have the ability to pay off the debt after 1 year without penalty. The loan also has only one principal payment of $500,000 due June 30 of this year, which coincides with the timing of our annual dividend payment from our Chinese joint venture, BOMAY. We believe this now provides the company with sufficient working capital to support our 2017 plans.

With that, I'll 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'd like to start my comments by taking you all through a brief 2016 market sector review.

I'll first start by repeating that our oil and gas business was down 46% year-over-year, and anybody who's listened to the calls over the last year understands that the slowdowns in the upstream and midstream oil and gas markets have affected the majority of our oil and gas revenue. The entire oil and gas market remains very competitive with strong pricing pressures across the entire sector. Our focus on the midstream and downstream market sector has resulted in many new orders in the quarter. We announced in Q4 that we had won multiple new products, including a New England LNG plant, a landfill gas project and a multimillion dollar project with one of the world's largest Engineering Procurement and Construction firms. I'd mentioned in the past that we are now approved at 6 of the top EPC firms in our market and that these firms are responsible for executing the majority of the projects in our midstream, downstream and power generation markets. Subsequent to the end of the quarter, we announced a $6 million new project award for the companies IntelliSafe Medium Voltage Arc-resistant switchgear for a leading midstream operator.

Moving to the upstream part of our business, our U.S. drilling business had only one major project that we delivered in 2016. But if I look towards joint venture in China, BOMAY continues to execute well in the challenging market environment.

In Q4, BOMAY had revenues of $3.9 million, and AETI recognized 40% of that profits as equity income, which is $163,000. For the year, BOMAY made $2 million of income on total revenues of $33.5 million, and AETI recognized $804,000 of equity income.

Staying with the international theme, M&I Electric Brazil had another strong quarter, where they saw revenue increase in Q4 to $1.5 million, up 14% from Q3. For the year, M&I Brazil reported revenues of $4.6 million, up 45% from 2015. And remember, all of that revenue comes from services, and a vast majority of that comes from the drilling and marine market sectors.

Moving on to the Power Generation sector, our progress on the power gen and distribution market sector in 2016 was remarkable. Some of you may remember back several years ago, when we entered this market when I report that we had one project at a time and I talked about how lumpy our Power Generation business was. Based on great sales work and strong customer satisfaction, the Power Generation distribution market sector for us was up 230% year-over-year and now represents 1/3 of our overall company revenue in the year. I'm very pleased with our progress in that sector and expect it to continue in 2017.

Our third sector is the marine and other industrial market, which was up 42% from 2015, primarily due to some of the chemical and other industrial businesses that we -- business projects we completed this year. We're also seeing growth in other industrial markets like recycling and steel as well.

So that's the summary of the market sectors. I'd like to now turn my attention to highlighting several key focuses for the company as we head into 2017 to enable us to meet our top line and bottom line objectives.

Look, obviously, our #1 growth strategy is to continue to execute in the midstream, downstream and Power Generation sectors with our sales and products including IntelliSafe. And we tell you our sales team is doing very well and the reception for our award-winning IntelliSafe arc-resistant switchgear continues to be strong.

Our second thrust for 2017 is our continued push on growing our services business. As part of our growth strategy for services in Brazil, we recently announced the hiring of Marcelo Monteiro to head up our industrial and energy group. Marcelo has a long history in the Brazilian electrical services markets, including executive leadership roles at General Electric and other major electrical service companies. Marcelo will be focused on building up our nondrilling and marine services business in Brazil, including the broader Power Generation and industrial customers. We are already seeing great opportunities to extend customer relationships into larger service and maintenance projects, including where we will take over our customers' entire electrical infrastructure, and I look forward to reporting progress on those pursuits in future calls.

Back in the U.S., as we mentioned in the last call, we've seen additional service opportunities in U.S. based on increased oil prices, and we've seen the corresponding increase in rig count activity go up, where customers are looking at now upgrading their rigs. And they've got to go get them back to work, which for us may be a combination of services and upgrading products in terms of what that project would look like. We've responded to this by adding services, sales and technical resources to the team, including bringing back Doug Williams to the company to lead those efforts. Doug was with M&I for 15 years in a variety of roles, including General Manager of our Houston drives engineering team, the manager of our Houston services groups and Vice President of our international business, where he helped establish our international joint ventures in China and Brazil. After 5 years working in a variety of roles including business development at our major drilling power system competitors, OMRON, which was acquired by Schlumberger, and National Oilwell Varco, Doug has returned to the company in newly created role as our Vice President and General Manager for our global drilling and marines business, where he will focus on leading our services, upgrades and new product business for those markets.

The third part of our focus relates to our project execution and having the balance sheet to support our growth. Our operations team has done a great job in the last 2 years supporting our customer growth, and we have many examples of satisfied customers, which we know is the case because they gave us second and third follow-on orders. This year, the operations team focus is to continue to execute margin enhancements and to continue to improve our gross margins.

Regarding the balance sheet, I'd like to comment on the Hunting Dog financing. I appreciate the support we've received from our bank during the past 12 months, but we knew that we kept bumping up against our covenants, and as a traditional financial institution, we were constrained on getting additional liquidity from them. Hunting Dog Capital specifically focuses on situations like AETI, where we have a ramping business and the need for capital, so we refinanced our note and got the incremental liquidity at the same time. This financing allows us to execute our 2017 growth plan and fulfill those orders that the sale team has been booking.

So to summarize, our revenue and our backlog continues to grow, all based on our investments and products and sales we did in 2014 and 2015. Our services business is growing and is expected to contribute higher-margin revenue this year, and we now have the financing in place to support our growth. Look, our markets are still tough, and I can't imagine we're going to be on some exact straight line with every single one of our metrics up and to the right. I expect some metrics will grow faster than others. But in general, we're definitely on the right track. We still have to continue the book orders and have profitability for the company, and I look forward to sharing more of our progress with you on those in next quarter's calls.

Before we proceed with the Q&A session, I'd like to conclude the prepared portion of my comments by thanking our employees for the 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 Lexie for the Q&A session of the call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will take our first call 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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Group of questions here. First of all, with the new credit facility, if your business ramps more quickly than planned, do you have ability to get additional capital from them?

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

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Bill, this is Bill Brod. Yes, we do think we have that ability. We've not really discussed it at any length, any detail, but they have expressed a willingness, and we would entertain that when -- if that opportunity presented itself.

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

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Bill, this is Charles. Let me also respond, which is as you know, the majority of our projects cash flow themselves and so what's happening is that this influx of orders is bringing in initial milestone payments and so the cash situation is actually improving. And so the expectation is as long as the project milestone payments are aligned with how we've been doing the business for the last couple of years. We think we should be okay, even as the business continues to ramp.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [5]

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Great. That is helpful. And given the commodity price increase that we have seen, are you seeing any signs of the midstream market showing some improvement, or is that still pretty moribund?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [6]

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No, the midstream market is showing improvement. No, there's no question. The midstream market is showing improvement. And you know, we've -- we're absolutely seeing an increase in opportunities. We're seeing an increase in projects moving forward. And I think it's a combination of the oil prices going up, which affects some of the midstream projects but also some pent-up demand from last year. So that project that we announced with the large midstream operator, I forgot, in the last month or two, that was for a pipeline -- a crude pipeline from the Permian to Houston. And we actually are doing work at the terminal in Houston, and we're doing work on the sort of the front end of the pipeline and the middle of the pipeline. That's related to the price of oil, right.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [7]

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So if I think back to a year ago, you talked about the drilling business being very quiet and midstream actually turning down, and you were hopeful with the E&C firms and Power Generation. Now when we roll the clock forward a year, not only were you correct but it seems as though a number of things have turned because here on the call, you mentioned that the drilling business is showing some signs of life. The midstream business is now turning up and you have had success and expect more success in the power gen business. Am I hearing you correctly that basically the business in total has turned the corner and you are starting to see pretty much all business lines showing signs of life?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [8]

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So that was a good articulation of lots of discussions, Bill. So, yes, I think what I would say is that our -- we are seeing signs of life in the drilling market based on the price of oil, and that's resulting in more services opportunities and upgrades versus lots of new drilling rigs getting built. But still, today, versus anytime in the last 2 years better, much better. The midstream market absolutely, at this point is a positive and the orders that we're getting are reflective of that. And I think that the business investments that we made in the last 2 years in the downstream and the power gen and the EPC markets including IntelliSafe, that's continuing forward strongly, all right. So that's -- I don't think the market has changed at all there. I think the market's where it is. We're just executing and taking market share from competitors who are having problems executing their projects which we don't have.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [9]

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And you have not talked a lot about the services business in the U.S. historically. Would you talk a little bit about that relative to the drilling business? And just how well-known you are for your services and the profitability of services relative to the new equipment?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [10]

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So we divide our services business in the U.S. into essentially 2 groups. One, I'll call a power distribution-oriented services, which is run out of our Beaumont operation and that's the group that does services for refineries and chemical plants and where we go in to do maintenance, and we do startup and commissioning of our switchgear projects and things like that. And the other part of our business is the services for the drilling and marine, which is out of Houston and out of Homer, Louisiana. Our service facility at Houma, Louisiana and that's for the vessels and that's for drilling rigs and that's, again, maintenance and start up and commissioning, but for slightly different products that's around variable frequency drives and other things like that. So that's out of Houston and Houma. So both of those businesses, we've been in for a long time. They've been -- they've got some established customers. We have increased the services sales for all of those groups because we believe there's a market there and the services is in general much higher margin businesses than you'd normally see in the products business. So the services business for us is growing, and we're expecting big things from the U.S. services business in terms of growth in addition to the Brazil services team into 2017.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [11]

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That's helpful. I have one more I would like to get in here. You're selling and marketing expenses. You've been controlling them very effectively. But given what you're seeing with the positive developments in each of your markets, is it time to turn that selling and marketing spending up?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [12]

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So we have a very tight balancing act we're trying to do, right, which is we've got a plan that we need to execute for the year that has both growth on the top line and profitability objectives, right. And so we have very carefully added a couple of sales resources for selling services. And those services, sales resources are able to, basically, very quickly from a sales cycle time get to paying themselves back, okay. Where the new sales ramp time for a product salesperson maybe 6 to 12 months, for services salesperson it should be 3 to 6 months, for example. So we're doing 2 things to address these markets. One is we're very carefully adding some new reps, primarily around the services part of the business and then we've also started increasing our -- what I'll call our third-party reps. But we now have other companies that we've brought on that are selling our products on our behalf. And so we've got a number of reps in third parties and a number of markets around that we're not able to successfully call them directly but are able to address some of those market requirements as sort of an outsource sales group, and that's at no cost, no upfront cost until we actually get orders.

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Operator [13]

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(Operator Instructions) We'll take our next question from Joe Murad.

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Unidentified Analyst, [14]

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I have 2 questions. One, if you could update anything on the Singapore joint venture? And the other question is I had noticed there's been some increase in some job postings. I thought I saw 7 of them last time I checked. Could you say a little bit more sort of in line with the themes of the call?

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

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Sure. Joe, nice to hear from you. Yes. So couple of things. So one is the Singapore joint venture is essentially in hibernation mode right now. There's no active projects. There's no active employees. There's still support from our joint venture partner Sonepar, but that's essentially in hibernation mode and that's essentially where it is right now. We hope that as the market, the global oil and gas market starts to tick back up, remember, Singapore is mostly focused on the offshore drilling market. So as we head later in the 2017, we will continue evaluating what makes sense for us to do in terms of bringing the thing out of hibernation or out, but Singapore is essentially on pause, okay. In terms of the job postings, yes. We actually have a number of jobs posted. We're hiring inside the company, which is still somewhat unusual, and those are 95% all related to executing the projects that we've actually booked. So we just hired a senior project manager to manage some of these new projects that we've pulled out of one of our largest competitors. We hired -- we have headcount for drafters and engineers and other people, all direct cost -- direct project charge people to support the projects that we've got in-house right now. The only other headcount that should be on there should be the services sales, which we talked about earlier. So other than that, in terms of fixed costs, our fixed costs are not getting increased, okay.

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Unidentified Analyst, [16]

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I think you just -- small follow-up to the Singapore issue. Is it conceivable to sort of use that sort of base as a way to expand your business? Not so much in the oil and gas, but any other aspects within the power generation and the other initiatives in that region.

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [17]

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So yes. So yes, technically. Our issue is the way that -- the Singapore joint venture is originally set up for 2 things. One is service for the global drilling contractors and those are not operating so much as the services part of the business is down. And then if there's new builds going on in Singapore where they needed ANSI products and ANSI products are things that we make in Beaumont. Many of the markets that are outside of the oil and gas in Southeast Asia have moved to a European standard, this International Electrical Commission, this IEC, standard and that's what those markets have. So those markets, we've had challenges in the past pursuing those effectively out of Singapore with the Singapore manufacturing costs versus some major multinationals that build in low-cost places like Malaysia, Indonesia. And so for all those reasons, I think it's going to be a tough push for us for at least the next 6 to 12 months. We still like the markets, but our primary focuses this year is on the North American products and global services and that's where we've got a -- as a somewhat smaller company, we've got to just put our wood behind the areas that we think have the best top line and bottom line impact.

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Operator [18]

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We will take our next question from Ross Matthew.

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Unidentified Analyst, [19]

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As you shift your focus to services, is there any technology budget for IoT projects or establishing predictive capabilities on where those services are needed?

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

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Nice. You're in one of my favorite areas is the internet of -- so IoT, for the other people on the phone, it's Internet of Things. The concept with Internet of Things for the rest of the folks is very sophisticated remote monitoring and analytics capabilities and predictive analysis. So 2 things on that, Ross. One is, we already do that Internet of Things and remote monitoring for a number of our customers. So we've got offshore drilling rigs that we've deployed with Internet of Things monitoring capabilities. We've got land-based projects that we're doing, and we actually continue to bid projects, especially, on the overall maintenance perspective, where we could be doing remote monitoring of the entire operation of the plant, predictive analytics and then basically know in the real time what's going to happen with the plant. So from a services perspective, that's a big part of our future. But interestingly enough, one of the big benefits of the IntelliSafe arc-resistant switchgear product, one of the reason that we've won so many of the these awards is not only is IntelliSafe the safest product on the market and meets these industry standards for the process industry, we designed it to be fully Internet of Things capable. And so, there's sensors spread throughout the system that basically, in real time, give our customers the ability to monitor all of the things that would go on in the power distribution infrastructure and in real time report out to their DCS systems or their other management or literally on your cell phone, you could get an alert that says we've got some advanced warning predictive analysis thing going on, on your switchgear and somebody needs to go take a look or call us, and that includes all the remote monitoring and everything else. So that's a big thing for us and it turns out there's not that many people doing it very strongly in the industry. We're -- when we talk about IntelliSafe with our customers, they like that feature. They just don't exactly understand what it means, so we're little early for that. But I love the question and it's a big part of our technology going forward.

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Operator [21]

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(Operator Instructions) We will take another question from Bill Dezellem.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [22]

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I want to circle back to the pipeline that's going from the Permian to Houston that you were referencing that you had won. Historically, the midstream, as I understand it, has not been focused on arc resistance and, bluntly put, we expected that they would need to blow up a few people before arc resistance would become important to them. What's different with this customer? And why they chose to go with IntelliSafe on their project?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [23]

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Good to hear from you again, Bill. So totally agree. It's a real challenge, and this is part of what we talked about in this project award release, which is that the power gen markets and the downstream markets, where there has been explosions and people have been killed, focus on the advanced technology like arc-resistant. But the midstream operators are typically highly, highly price sensitive and frankly have not worried about employee safety nearly as much. Many of them talk about it, but very few actually do something about it. I can't name this owner, okay? But the owner is one of the largest 2 midstream operators in the country is focused on safety. And only in the last 6 months or so, 6 to 9 months has really started saying, they're going to go arc-resistant for all their projects. It could be because they got a new CFO in there, who has been in another company that's been sued in the past. I can't tell you exactly how they got there. But the incremental price between traditional switchgear and arc-resistant switchgear may be 20%, 25%. And our message would be, that's a pittance compared to the risk that you'd have of actually putting some of your employees at risk by not using it. So we applaud that midstream operator. And our hope is that as we publicize what these guys are doing and as other people publicize what these guys are doing, then the general market will also start to move towards safety first and not price sensitivity as the most important determinant of how they're going to make purchasing decisions. So you're exactly right. As an industry, we're very happy that the leader in the midstream market that's the first one decided to go there, we're getting lots of business, and they're choosing IntelliSafe.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [24]

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And did I hear you say that they are planning on going 100% arc-resistant over the course of the next, did you say 6 months?

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Charles M. Dauber, American Electric Technologies, Inc - CEO, President and Director [25]

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I think what I said is that over the last 6 to 9 months, their projects have started going arc-resistant. I can't tell you that all of their projects will be arc-resistant, but I can tell you, we understand from the downstream industry that once it became evident that the market was using arc-resistant switchgear in refineries then any refineries that weren't using it or any projects weren't using it were immediately suspect if there was a safety incident there. And so there's a tipping point that will happen inside that company and a tipping point that will happen in the industry as it relates to safety, and the timing will be -- I can't tell you the timing. They don't tell us the exact timing.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [26]

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That's helpful, Charles. Let me switch, if I may to your initiatives to gain more business with the EPC firms. Would you provide us all an update on that process, please?

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

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Yes. So, as we talked about for many calls, we set out 2 years ago with the IntelliSafe R&D and the sales infrastructure in terms of new sales personnel project management and all the other things that we need inside the company to go and penetrate the EPC firms, these Engineering Procurement and Construction firms. And the reason is because that's how every single one of these midstream and downstream companies do their projects. They don't have the engineering resources inside to do these things. They hire firms like Bechtel or whoever they are, right, to go do their projects. So we started attacking the EPC firms 2 years ago. We have gotten on the approved suppliers list at 6 of the largest firms in our industry, and you've started seeing announcements for us, as we break into those EPC firms for the first time. And so that continues to go well, and we hope to be able to announce more project awards in the next week or two with new -- other new projects and other new EPC firms. But they -- I think what's happening is that they are -- they're interested in our technology. They like IntelliSafe. They like the fact that we make the PDCs. They come to Beaumont, they're very impressed. But actually, what they are surprised about is actually how well we manage these projects and this level of sophistication of our project management group. We're a tiny company compared to the largest EPC firm in the world. But we are very effectively managing their project and delighting them in terms of how we interact and keep the thing on schedule and the whole thing. So they're -- that's a real value that the customers don't understand until we get the first order, but they certainly understand when it comes time to giving repeat orders, which is what we started getting with some of the firms we started doing business with 1.5 years ago, is now we get those repeat orders and second order and the third order this year.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [28]

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That's all so helpful. And then I would like to shift to pricing. Given that you have seen a difficult pricing, but you were also seeing the business activity improve, that oftentimes comes with improved pricing and ultimately does. The question is, are you at that tipping point now where pricing is improving? Or where would you characterize that at?

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

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Yes. We pay attention to that pretty much every day. Look I think that versus last year, our pricing is starting to inch up. I do not think that we're at the tipping point, where the prices are going to return to where they were 2 years, 3 years ago. We just have to keep monitoring and stay on top of it. The market is still very price sensitive. There's still lots of people here. For us, the volume is important to keep our team and our overhead covered, right. And so I think what really is going to happen, Bill, is that the pricing for the products will be, I'll call it, somewhat consistent. I think we will opportunistically look into where we can continue to inch that up. I think the blend of the business in terms of the products and the services, with services with higher margins, I think, altogether, we would think that that's going to be one of the big drivers for the business in 2017.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [30]

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Great. That's helpful. And lastly, since we are all but just a handful of days done with the first quarter, would you go ahead and discuss any additional information about the Q1 that you're able to share at this point, please?

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

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I think that the big thing for Q1 that I'm able to share right now would be the financing that was subsequent to the end of Q4, which we talked about some significant project awards that we've talked about and we'll continue to report on those sorts of things as we progress. But other than that, I think you have sort of a picture of what's going on in the business right now. And then we'll -- I don't know when the earnings call will be for Q1, but it will be sooner rather than later, right. And so I'm sure we'll be talking again soon.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO, and Chief Compliance Officer [32]

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And I would presume, given the awards that you have announced that as of today that your backlog is higher than what it was at the end of Q4? And if the awards that you were hoping to get in the next few days that you made reference to press releases, then it would clearly be up versus Q4?

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

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So all I can say is we're continuing to book business. Backlog is up last quarter to sort of Q3 to Q4. And we obviously are continuing to drive the bookings, which would create an incremental backlog. So you know I'm always careful about sharing anything like that so.

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Operator [34]

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(Operator Instructions) It appears that we have no further speakers. This does conclude today's program. Thank you for your participation. You may disconnect at any time.