AE(AE) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Adjusted EBITDA for Q2 2024 was $5 million, up from$ 4.2 million in Q1 2024, despite an additional $0.8 million self-insured retention expense [8][9] - Unrestricted cash increased by$ 1.9 million to $38.5 million, and liquidity improved by$ 4.9 million to $88.5 million compared to Q1 2024 [9] - Net loss for Q2 2024 was$ 2.2 million or $0.87 per share, compared to net income of$ 827,000 or $0.32 per diluted share in Q2 2023 [18] - Cash provided by operating activities was$ 8.3 million in Q2 2024, compared to $27.3 million used in operating activities in Q2 2023 [18] Business Line Performance - GulfMark Energy (crude oil marketing) saw significant growth in margins and volumes, contributing approximately 80% of the company's EBITDA [10] - VEX Pipeline throughput increased by over 20% in Q2 2024, reaching 13,881 barrels per day, driven by GulfMark routing volumes and third-party revenue [10][11] - Phoenix Oil (hydrocarbon repurposing) continued to face challenges due to reduced truck deliveries, but barge deliveries are expected to begin in Q3, opening new markets [11] - Firebird Bulk Carriers (crude oil transportation) experienced flat volumes but was impacted by self-insured retention expenses, leading to missed targets [12] - Service Transport Company (chemical hauling) showed mild sequential improvement, but revenue was slightly down due to short-haul loads and rate reductions [12] Market Performance - GulfMark's legacy trucking volumes grew from 64,634 barrels per day to 67,099 barrels per day in Q2 2024 [10] - VEX Pipeline's volume growth was driven by GulfMark and third-party customers, with throughput increasing from 9,377 barrels per day in Q4 2023 to 13,881 barrels per day in Q2 2024 [10][11] - Phoenix Oil's slowdown is expected to be alleviated by barge deliveries in Q3, which will open new markets and improve margins [11] Company Strategy and Industry Competition - The company is focusing on cost control and operational efficiency across all divisions, with expectations of market recovery in 2025 [26] - GulfMark is expected to maintain strong margins into Q3, while VEX Pipeline's performance will follow GulfMark's volume trends [21][22] - Phoenix Oil's new rail spur in Dayton, Texas, is expected to enhance cost-effectiveness and efficiency by eliminating trucking expenses [23] - Service Transport is seeing early signs of recovery in the freight market, with increased carrier turndowns and targeted rate increases [25][30] Management Commentary on Operating Environment and Future Outlook - Management noted that the first week of Q3 was impacted by Hurricane Beryl, but the company does not expect a material impact on Q3 results [20] - The company expects GulfMark to continue strong performance, while VEX Pipeline will focus on securing third-party barrels [21][22] - Phoenix Oil is expected to see improved results in the second half of 2024 due to barge deliveries and the new rail spur [23] - Service Transport is expected to benefit from tightening capacity and increasing rates, with recovery anticipated by early 2025 [25][30] Other Important Information - The company made$ 3 million in accelerated principal payments towards its $25 million term loan, reducing the balance to$ 15.6 million [9] - Capital expenditures for Q2 2024 totaled $2.4 million, primarily for equipment purchases and construction of the Dayton facility [19] Q&A Session Summary Question: What catalysts are driving optimism for the chemical transportation market recovery in late 2024 and early 2025? - Answer: Increased carrier turndowns and trucking company exits are creating a capacity shortage, leading to targeted rate increases for Service Transport [30] Question: What is the outlook for VEX Pipeline throughput for the rest of 2024? - Answer: Volumes are expected to remain steady but may not reach the levels seen in Q2 due to reduced producer flowbacks [33] Question: Will terminalling volumes follow the same trend as VEX Pipeline throughput? - Answer: Terminalling volumes will remain steady, but third-party revenue at the Victoria terminal will drop off in Q3 [35]