Earnings Transcript for AMMX - Q2 Fiscal Year 2020

Operator: Greetings. Welcome to the AmeraMex International Second Quarter 2020 Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to you host, Marty Tullio. You may begin. :

Marty Tullio: Good morning, everyone. Before we begin today's call, it's important to -- that everyone understand that statements made in this conference call that relate to our future financial results, market size of the company and growth plans for the company are all forward-looking and involve certain risks and uncertainties associated with demands for the company's products and services and development of markets for the company's products and services. Actual results, events performance may differ materially. Conference call participants are cautioned not to place undue reliance on these forward-looking statements, which speak only as the day of this conference call. AmeraMex is not obligated to release publicly any revisions to these forward-looking statements as a result of unanticipated events after the date of today's call.

I'd now like to turn the call over to AmeraMex's CEO, Lee Hamre. Good morning, Lee. :

Lee Hamre: Good morning, Marty. Thanks for joining us this morning for our second quarter conference call and COVID-19 update. We hope you and your families are doing well since we last spoke with you.

With me today is our CFO, Hope Stone; and by phone, the other Board members, Mike Maloney, Marty Tullio, Jeff Morris and Brian Hamre. Hope worked with our bank to secure financial assistance from the small business administration, we did receive $228,442 under the SBA Paycheck Protection program, allowing us to keep all our employees on board. And we were notified that AmeraMex was approved for the SBA Disaster Assistance Loan for up to $2 million. They sent us a $10,000 first payment, but have not yet been notified of the total amount we're going to receive, the terms of the loan or when we'll be receiving the funds. We speak weekly with the funding source, but they do not know when the funding will come through. We are one of many companies approved but not yet funded. As you will hear when Hope provides an overview of revenue for the second quarter and 6-month period of 2020, revenue was down 59% for the 6-month period. This is due primarily to the COVID-19 shutdown issues affecting many of our current and potential customers. :

With the drastic drop in revenue, we thought it prudent to have a line of monies that can be used for administrative expenses, including legal and auditing fees associated with being public. We entered into an agreement with a New York based company to provide these funds when needed. The agreement is outlined in an 8-K filed with the SEC around July 20. This was done with much thought and due diligence. The organization has worked with over 34 public companies and provided the contact information for their CEO, CFOs. We reached about half of the references and spoke with 7 or 8 CFOs. The results were favorable, and we moved forward with the agreement.:

As you have seen from our many news releases, July was an exciting month. From July 1 to August 4, we recorded $2.2 million in sales. The $2.2 million converts to revenue when the equipment ships to our customers. We are pleased that our sales department is busy, our shop is busy, and our employees are servicing contracts with our customers and traveling to do so. Delays have been minor. :

Our finance, administrative and sales teams are still working semi-remotely. California is still in partial lock down, but we believe the worst -- worst of it is over. The management team fully expects the remainder of the year to be outstanding. :

I would like to turn the call over to our CFO, Hope Stone, so that she can provide an overview of our financials for our second quarter and 6 month periods. :

Hope Dilbeck-Stone: Thanks, Lee, and good morning, everyone. As Lee mentioned earlier, sales were adversely affected by the -- for the 6-month period ending June 30, 2020, but we are confident the next 6 months will show a strong recovery.

Let's begin with the income statement. Revenue for the second quarter ended June 30, 2020, was approximately $1.8 million, a 67% decrease when compared to revenue of approximately $5.5 million for the second quarter of 2019. Revenue for the first 6 months -- for the 6-month period was $3.2 million, down 59% when compared to $7.9 million for the 6-month period of 2019. The downturn in revenue was due to the COVID-19 issue in addition to its effect on 2 large orders that were canceled because of the 2 customer's financial uncertainties. :

Gross profit for the quarter was $430,288 compared to gross profit of $605,604 for the second quarter of 2019. Gross profit as a percentage of revenue was 24% compared to 11% for the second quarter of 2019. Gross profit for the 6-month period was $874,500 compared to gross profit of $1.2 million for the 6-month period of 2019. Gross profit as a percentage of revenue was 27% for the 6-month period compared to 15% for the 6-month period of 2019. :

The net loss for the quarter was $439,840 compared to net income of $24,032 for the second quarter of 2019. This loss is attributed in part to a onetime operating expense of $428,700. The net loss for the 6-month period was $567,912 compared to a net loss of $258,586 reported for the comparable 6-month period in 2019. :

On the balance sheet for the 6 months compared to the year-end December 31, 2019, total assets increased $2.3 million, which included an increase of $2.6 million in inventory. Total liabilities for the period increased by $2.9 million. :

Our revenue position will change dramatically during the next 6 months as sales continue to grow. We have received $10,000 from SBA and are approved to receive up to an additional $2 million loan. Financially, we are in good shape. :

I would like to turn the call back to Lee. :

Lee Hamre: Thanks, Hope. 2019 for most -- the most revenue since 2008, while the first 6 months of the year were not what we projected or budgeted for. We are off to an excellent start for the remainder of the year.

Operator, we'd like to begin the Q&A, please. :

Operator: [Operator Instructions] And it seems as if we do not have -- we actually have one question from Allan Cohen with B&C Financial.

Allan Cohen: Lee, I'm glad that everyone is safe, and thanks for the good job that you do. I'm very curious about the onetime operating expense of $428,000 [ you seem to have sustained ] the whole quarter. Can you please elaborate. Or Hope, can you please elaborate on what that expense was?

Lee Hamre: Hope will have to explain that.

Hope Dilbeck-Stone: This is Hope. Yes. So it had to do with the legal settlement.

Allan Cohen: Can you elaborate?

Hope Dilbeck-Stone: I can't. It's confidential, but that's basically what it was, yes.

Allan Cohen: So is this a 100% settlement?

Hope Dilbeck-Stone: Absolutely, we're done. It's over. So we have it in -- had to be shown on the financials all at once.

Allan Cohen: That's not fun to hear.

Hope Dilbeck-Stone: No, I'm sorry. It won't be there going forward [indiscernible] positive.

Lee Hamre: Yes, it's gone now. It’s behind us. So...

Allan Cohen: Can you tell me how you're carrying the $228,000 PPP loan on the balance sheet?

Hope Dilbeck-Stone: Yes. So it's included in our short-term debt. And it's been used, and we are now in the process of getting it forgiven. So we [ filed and ] finished using it. So now we have to request to have the forgiveness. We only use it for payroll, so it could be 100% forgiven.

Allan Cohen: Okay. And last of all, Lee, could I get some kind of forecast from you, some kind of forward-thinking on what you believe or what you'd like to see sales 3 years from now? What kind of numbers do you think you'd be looking at, if things progress the way you'd like them to?

Lee Hamre: I think we're doing great with growth into the industry. I really believe we're going to get -- now that the recession is behind us, I believe that we get this COVID-19 behind us, and we will aggressively get back into heavy construction equipment. If we're able to do that, which I see no reason why we can't, construction is really moving in the direction of being as busy as we've ever seen it in Northern California. And with that in mind, we pulled out of heavy construction dirt equipment back when the recession hit, and we've been working with container handlers and port equipment. If we open that door and get back into heavy construction equipment, we should be able to double our sales over the next 2 to 3 years and maybe even triple. I'm real confident that if the business is out there that we can get more than our fair share. Right now, what happens is people that sold off their equipment throughout the recession, just to keep their company going, are getting big contracts, and they don't have the equipment to do the contracts or the money to buy the equipment, basically. So our rentals are a really big part of our next 3 years.

Allan Cohen: Okay. Well, that's good. How about now that the dollar is softening, do you see any potential for international picking back up?

Lee Hamre: Oh, yes. Absolutely. I'm still working with everybody we've worked with for years, and there's a real good chance it's going to pick up. That's the key. I mean, you've got to have that happen.

Operator: And we have reached the end of the question-and-answer session. I will now turn the call over to Lee Hamre for closing remarks.

Lee Hamre: Okay. We'd like to thank all of you for participating in the call. And for your continued support. We look forward to talking with you again at the end of the third quarter. Thanks again.

Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a great day.