Brenton Hatch - President and Chief Executive Officer Ryan Oviatt - Chief Financial Officer Cameron Tidball - Vice President, Sales & Marketing.

Rob Brown - Lake Street Capital Markets William Bremer - Maxim Group Joseph Reagor - ROTH Capital Partners.

Good afternoon, everyone and thank you for participating in today's conference call to discuss Profire Energy's Fiscal First Quarter Ended June 30, 2016. Joining us today is the President and CEO of Profire Energy, Brenton Hatch; and CFO, Ryan Oviatt.

Before we begin today's call, I would like to take a moment to read the company's Safe Harbor statement. Cautionary note regarding forward-looking statements. Statements made during this call that are not historical are forward-looking statements.

This call contains forward-looking statements including, but not limited to statements regarding the company focusing on reducing expenses, improving operational processes and making necessary investments.

The company's ability to leverage it's new Burner Management System the P3100 into new areas of the oil and gas industry and into other industries giving the company access to new market and future growth, the company's belief that the strength of its balance sheet will support the company through this difficult industry environment, the company's belief that low oil prices and lack of drilling and well completions impact the company's ability to capture revenue, the company's ability to leverage its current investment into revenues in future periods, the company's ability to maximize efficiency and reduce unnecessary expenses in future periods, the company's ability to execute on its capital allocation plan, the company's ability to effectively manage cost, create a scalable cost structure with greater leverage in future periods and to continue to generate positive cash flows, the company's intent to execute it's share repurchase program and the company's ability to employ capital to generate meaningful returns in future periods.

All such forward looking statements are subject to uncertainty and changes in circumstances.

Forward-looking statements are not guarantees of future results or performance and involve risks, assumptions and uncertainties that could cause actual events or results to differ materially from the events or results described in or anticipated by the forward-looking statements.

Factors that could materially affect such forward-looking statements include certain economic, business, public market, and regulatory risks and factors identified in the company's periodic reports filed with the Securities and Exchange Commission.

All forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

All forward-looking statements are made only as of the date of this release and the company assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances, except as required by law. Readers should not place undue reliance on these forward-looking statements.

I would like to remind everyone that this call is being recorded and it will be available for replay through August 18, 2016 starting later this evening. It will be accessible via the link provided in today's press release, as well as on the company's website at www.profireenergy.com. Following the remarks by Mr. Hatch and Mr.

Oviatt, we will open the call to your questions. As part of the question-and-answer session, Mr. Hatch and Oviatt will be joined by Profire Energy's VP of Sales, Cameron Tidball. Now, I would like to turn the call over to the President and Chief Executive Officer of Profire Energy, Mr. Brenton Hatch..

Good afternoon. Thanks for joining us today. It seems like we’re just a few weeks ago that we held our last conference call but nonetheless we are eager to provide an update on our first fiscal quarter of 2017.

As we stated on our last call we expected the first half of the fiscal year to be challenging for the company, this quarter being evidence of that for more than a year now our industry has faced significant headwinds to which we have not been immune but we feel that relative to many of our industry peers.

We have dealt with these challenges as well as or better than our counterparts, there are so many variables out of our control but those specs of the business that we can control we feel we've managed very well.

Some of the quarterly highlights include the fact that we controlled costs and working capital well enough to again generate positive cash flow. I think you would be hard pressed to find a company of our size in this industry that has generated positive cash flows during the entirety of this industry downturn.

Our cost management strategy has been very successful reducing operating expenses by more than $1 million dollars compared to the same quarter last year. Generating positive cash flows will continue to be a key area of focus for the company.

Additionally we have made improvements to our inventory management leading to a decrease in total inventory of $1.1 million and we will continue to work this balance down over time. Lastly in addition we implemented our stock repurchase program in the last few weeks and believe that it represents a great long term investment for the company.

We will continue to execute on our stock buyback plan within the approved parameters. We will continue to seek out opportunities that will drive long term value for the company and our shareholders while generating meaningful returns on capital.

We believe that the 3100 our new combustion controller will provide significant value in the coming years for the company. We have already seen it's a positive impact for customers and are confident that we can continue to expand its capabilities to drive value for our clients in oil and gas and other industries.

In recent weeks we've been bidding on projects outside of the oil and gas market and are excited to see how these opportunities develop. There is no doubt this is a challenging time for our industry but we remain optimistic. Before I talk any further I want to turn the call over to Ryan Oviatt, our CFO to discuss the financial results for the quarter.

Ryan?.

Thanks, Brent. Yesterday after the market closed we filed our 10-Q with the SEC and discussed the quarter's highlights in a press release.

As always both of those documents are available on the investor section of our website along with this transcript in the coming days, While this was a challenging quarter for the company in our industry we believe we are managing the challenge well. That said let's take a look at the income statement.

In our first fiscal quarter of 2017 our total revenues decrease 44% over the same year ago quarter to 4 million. The decreased purchasing from oil and gas companies stemmed from the budget constraints due to the macro industry conditions.

Low oil prices combined with a lack of drilling and well completions continue to be a real issue for our ability to capture revenue especially in the most recent quarters. We will continue to focus on developing new products, diversifying into new markets and industries and enhancing our marketing and sales efforts with key customers and prospects.

We're also realistic in our assessment of the effects that the industry turbulence may continue to have on our us, most certainly in the short term.

We still believe that the first half of the fiscal year will be the more difficult half but we do anticipate that revenue levels will begin to pick up in the latter half though that could of course change if the commodity prices remain particularly volatile or suppressed.

Now moving on, our gross profit decreased to $1.9 million or 48% of total revenues as compared to $3.3 million or 48% of total revenues in the year ago quarter. During the quarter, the sales of service represented about 13% of total sales compared to 10% a year earlier.

The service division carries a lower gross margin than product sales but due to our efforts to right size the service business and reduced cost. We have increased service gross margin to 32% compared to only 10% a year ago.

We believe that when we begin to grow revenue again our cost structure will be very scalable and could lead to significantly higher growth and net margins for both product and service. Total operating expenses decrease to $2.8 million or 70% of total revenues from $3.9 million or 56% of total revenues in the same year ago quarter.

When compared with the same year ago quarter operating expenses for general and administrative decreased 31%, R&D decreased 18% and depreciation increased 48% as some of our fixed assets were parked and the depreciation which had previously been allocated to the cost of goods sold has been reclassified to operating expenses.

As Brent mentioned we have worked very hard over the last few quarters to reduce costs and become more efficient across the company and as you can see we've done that. We believe we have taken a prudent approach to cost management well deliberately preserving our long term growth opportunities.

If for some reason customer purchasing does not improve in the second half of fiscal 2017 we may have to look at further cost reduction. Total other income during the period was roughly $30,000, the majority of which was attributable to interest income.

Our net loss with $605,000 or a loss of $0.01 per diluted share compared to a net loss of $459,000 or $0.01 per diluted share in the same year ago quarter. Cash and cash equivalents totaled $22 million as compared to $21.3 million at year-end.

As Brent mentioned we had positive cash flow during the period mostly derived from working capital improvements and cost management. We believe there's still significant opportunity to improve working capital account and we remain focused on bringing the inventory balance down over time.

The accounts receivable balance has continued to decrease over the last several quarters and now sits at only 3.2 million. Of course some of that increase has to do with our lower sales level but our accounting and sales department have focused a significant amount of energy in this area.

Overall we have been very successful in our collection efforts recently. However, given the nature of the industry we are not immune to our customers financial struggle. In the Q1, results we have unfortunately seen an increase in bad debt expense, the majority of which came from a single midsize customer that went out of business.

Over the past year we have tightened our credit policy but unfortunately the industry circumstances create these issues. We will continue to do everything we can to collect our outstanding receivable and do not foresee significant collection issues with the vast majority of our customers.

We will continue to strategically allocate capital according to the plan we have previously communicated. We will focus on the preservation of cash. Potential investments in acquiring adjacent technologies conducting our stock repurchase program and seek out other value creation opportunities.

We believe this plan will ultimately drive long term value for Profire and our shareholders. As I mentioned on our last call we believe the cost in company structures that we now have is fairly scalable, as revenues begin to improve which we believe they will in the second half of fiscal 2017.

We anticipate being able to observe significantly higher revenues without needing to build out our cost base accordingly. We also want to reiterate that we are committed to managing our costs but we will not forgo investments that have significant long term benefits for the company.

This is a difficult time for our industry but we are positive about the long term market opportunity.

A key to our success moving forward will be our ability to plan and adjust appropriately for commodity price pressure and recognize long term opportunities for investments with significant returns as well as identifying ways to leverage our expertise into additional markets and industries with less oil and gas price risk.

We feel we are positioned well for the coming months and years as the industry finds its balance in activity in commodity prices. With that thanks and I'll send it back to you, Brent..

Thanks, Ryan. As Ryan highlighted we continue to increase our cash balance and have begun investing some of the higher interest income opportunities as well as in our own stock. We currently have cash reserves of $22 million which provides us with immense opportunities.

We've had any number of calls meeting exploring, potential opportunities to make investments or acquisitions but we will continue to be very deliberate in allocating capital. We will execute on the capital allocation plan that we have previously communicated as we believe it presents the best use of capital for us at the present time.

There are a few factors that we believe will have a significant impact on capturing the historical growth we experienced in the recent past. First the number of drills and uncompleted wells out there waiting for the economics of a basin to make sense before adding equipment to the well.

Second, the number of customers we now have is two to three times what it was before the commodity prices tanked. Third, our product offering is stronger than it's ever been with opportunities to serve markets previously unattainable. We believe that each of these factors represents an amazing runway we have as soon as customers start spending again.

We're very optimistic about the future and will not shy away from investing internally to capture our market opportunity. Just recently, we made an investment in hiring an additional CMS specialist to propel that product forward and further educate the market on its cost savings benefits.

We will continue to make internal investments in our new product because we believe these products will contribute significantly to the company's future growth. We will carry on with additional R&D for the CMS and 3100 as well as other products to improve and refine them to deliver greatest value to our current and future customers.

We believe the decisions we have made recently including the addition of the CTO role will lead to increased activity for these new products.

Just in the last few weeks we have had some opportunities to explore and work with a potential customer outside of the oil and gas industry and we're very optimistic about the possibilities the 3100 offers to diversify the markets we serve.

We truly feel that the future is bright for the company in the long term and that we are well positioned to manage through this current industry volatility that we've reiterated before, we feel that it's not a question of whether or not we make it through the industry storm, it's more a question of how capably we manage the process, how much we learn and how much strategic positioning we can do in these coming quarters.

We have no debt, we have significant cash reserves, we have invested internally and we continue to look for opportunities to make our acquisitions or investments that we believe would be accretive to the company.

Now apart from our hopes that the macro environment will improve which may or may not happen by this fiscal year and we are proud of a number of initiatives that we have already pursued as well as others that we have in mind.

Our recent cost reductions for example together with recent product and strategic announcements as well as our R&D pipeline have given us a very broad outlook for the coming quarters and years.

I would encourage you to come to our shareholder meeting in September to come see our facilities, meet our team personally and get a sense in person for our vision for this company. Finally just let me add that we're very appreciative to each of you as shareholders. We take your trust and investment very, very seriously.

We try to be available for questions and comments and we hope that you have a sense of our passion here at Profire because many of us internally are shareholders of course and are anxious to recapture the historical profitability and growth we experienced for so many years. We are confident that we can do that and I hope you have the same sense.

Now with that I would like to open the call up to questions.

Operator would you please provide the appropriate instruction so that we can get the Q&A started?.

[Operator Instructions]. The first question comes from Rob Brown, Lake Street Capital Markets. Please go ahead..

Hi, Rob..

Hi, Rob..

Hi, Brent. Hi, Ryan. First question if you can just -- you talked about the 3100 and a customer opportunity outside oil and gas.

Could you just give us a sense of the value proposition of that product and maybe how the opportunity outside of oil and gas what that is?.

Great question.

We -- yes let's refer to Cameron Tidball, Cameron you on the online and available?.

You bet, can you hear me okay?.

Yes you bet..

All right. Rob, thanks for your question.

Yes recent -- well 3100 as we got it market ready, it became more and more apparent and that it was part of the strategic plan that this could be a product that could provide solutions outside of oil and gas and so as part of that we've been speaking and looking for where do we want to target because obviously you can't just go after everything and we have an opportunity where we're actually next week going to be installing a 3100 solution in an agricultural application for grain drying.

The value prop for Profire in that regard from what we've seen so far and we're very early in our efforts to really figuring out that industry but the value prop really is they're dealing with old antiquated equipment which is very similar to their own gas industry.

They're dealing with a rising generation of new farmers and I was personally on site where the farmer was there with his father and he flat out said, "I want to work smarter not harder.

I can't keep getting up at all hours of the night to check if the grain dryer is overfilling and if we're too hot for burning grain or for not drying it enough." And he says, "I want new technology." And the proposal was put out and it was accepted and so here we go, our first install next week.

We've found a partner who has contacts as we don't have a currently internal sales channel developed to go after this market that we've found a partner that has some good connections in the agricultural industry in Alberta and Saskatchewan and we're going to start slow with him and we call it farmer marketing, we've already got our second install booked for shortly after we do the first one next week and we have already got interested farmers I guess it's one of those situations where one farmer has a better tractor than the other they all need to one up.

So far some excitement, it's very new, we will keep you posted for sure but it is exciting for Profire as agriculture is one of the areas we thought would be perhaps a good fit for us..

Q - Rob Brown :.

That’s correct, yes..

Okay. Thank you..

The next question comes from William Bremer, Maxim Group. Please go ahead..

Hi, Bill..

Hi, gentlemen how are you?.

Doing great. Thank you.

How is life in New York?.

Everything is fine. Thank you. I wanted to understand a little bit more. So a real big degradation for U.S. sales but yet Canada, year-over-year was actually up. So I wanted to get some clarity there. Did you have maybe any -- maybe one time sale in Canada this particular quarter or why was the fallout from the U.S.

so massive?.

Mr.

VP of Sales, do you want to address that again?.

Yes for sure. Bill, good to talk to you. You’ve hit it right on the head. Canada was able to secure a very big install, it was a 3100 that represented a good chunk as well there's been a several 3100 installs that were of higher dollar value which kind of inflated the quarter.

Overall Alberta, Saskatchewan and Canada you know what used to be probably 70%, 80% of our revenue out in the heavy oil area in the Northern Bakken has all but dried up but the team has been able to find some other ways to bring in revenues, some interesting projects, things that we couldn’t have done before and that’s kind of I guess bridge the gap and help out a little bit there.

.

How many 3100s have been installed so far?.

In Q1, 12 projects which represent on the 70 or so of our modules that's what we call them and close to about $300,000 of revenue..

Okay.

So as the service capabilities come into play here on the 3100 as well?.

So far we've done a lot of the service ourself on these 3100 installs. However smaller niche groups we're working obviously to when we feel we're ready bringing in the service integrator groups, the federal corps [ph] the reliant, those companies that are used to selling the big monster macs [ph] on Honeywell packages.

We will look to do that, it's not something we believe we want to do all the service for. We can't meet our goals by doing all the service, we don't want to, we want to work through and with our partners.

So but right now relatively with 12 projects in the first quarter we supported the majority of those directly if not we always had a project manager on site that we’re -- it's another revenue stream for us to look at. Always having a support there..

So let me understand you, Cam, part of the sales of these 3100 units, the service capabilities of profile will not be an ongoing service to them unless specified.

So I'm trying to understand whether or not as you sell this 3100 product line whether or not you'll have a sort of a an MSA contractor in there going forward part of the sales, part of these projects..

It will depend a lot on geography, type of application, complexity. We've already got well almost a half a dozen companies trained that can do 3100 installs geographically and strategically placed for example Northern Alberta, the Northeast United States, Oklahoma. We've got people in place already that can do installations.

So will we still offer services? Definitely, we will offer it and -- but in situations where repeat customer is able to do the install and support it then those will just become product sales. Sorry Bill, if I'm missing the question here..

No I got it. That’s fine.

One for you Ryan, in terms of the stock buyback, do you perceive that to be completed in this in say fiscal year '17?.

Yes, Bill thanks for the question. For the buyback plan we were approved by the Board for purchasing up to $2 million over a 12 month period, that period runs through about the end of May, 2017. So our goal is, we're not going to spend the full $2 million right off the bat.

We're not doing that in the next quarter but we'll do it deliberately over that time period. Of course we are under no obligation to fully spend the $2 but that just depends on where the stock price is and how markets move over the next 12 months..

The next question comes from Joseph Reagor, ROTH Capital Partners. Please go ahead..

Hi, Joe.

Good morning guys or I guess good afternoon depending.

Couple of questions if I can, I guess the first one being, you guys mentioned it briefly but M&A opportunities, is there anything that you can provide for additional color as to what you consider to be you know corollary businesses that you might look at or is it pretty broad stroke across the oil field services or any other maybe completely different industries from that that just has similar cost and manufacturing structures to your current one, like what you're thinking there?.

Thanks, Joe. We are actively looking at a number of different possibilities for ourselves. We are trying to stay fairly close to the industry that we are presently in or control related organizations that for example would take us into agriculture and those others but still very much related to the controls that we specialize in.

I can't be too specific but understand that we are in fact talking to various groups who are interested.

We aren't going to rush out and spend our money just because we have it sitting in a fund and waiting to do something but we feel now is a great time to be looking to find something that would be a accretive to what we're presently doing in coming years as oil prices start to come back.

Our finance team is trying to convince me that the rise in oil price for today is $2 is because we reported our numbers yesterday. I'm not sure we can go fight that [indiscernible] but we are quite optimistic about what is happening, Joe and we would like to be just like many of the people who have approached us to see if we are available.

We would like to be looking for opportunities. Well we can buy at the right price and get prepared for some of accretive action in the future..

Okay. That's good color there. Then It didn't seem -- in your last quarter you guys kind of gave a Q1 kind of sales outlook saying you know something similar to Q4 but I didn’t catch any of that for Q4.

This time even if you can't give some guidance on those lines, can you talk about what you're seeing so far? Is this better that last quarter given that you know the oil price has moved up a bit, where you're seeing the same kind of headwinds that you saw in the previous quarter?.

Another good question. We -- in fact I just spoke to Mr. Tidball this morning and Cam you might want to address the things that we talked about today..

Sure, you bet. So you know when we thought well hit around $50 our quoting activity significantly increased interest in booking demos, presentations, everything increased. Q1 was a strong quoting quarter compared to Q4. We saw a lot of increase. Q2 has stayed very stable but as we saw some shrinkage in WTI, so did quoting.

That being said we're still very positive on it, still companies are still looking coming to us for what is the bid, what solution do I need to have, what tweaks do I need to make because of the budget that we might have or might not have.

We’re getting -- this is earlier than we're used to but we are getting some customers saying, "Hey, you know come talk to us in a month or two because then we're going to be preparing for next year's budget." So a little bit of everything, we've got customers saying anywhere between $50 and $70 is what they need to resume completion activities at a more rampant pace.

But -- so Q2 could look a lot like Q1 however that being said the commodity prices has stabilized at a higher point. We could see a little bit of an influx of spend..

Okay. Fair enough. And then two just kind of more housekeeping level ones.

The CMS system can you give us an idea of what revenues is got into at this point? I know previously it was some $100,000 level on a quarterly basis and then you mentioned working capital reductions were a big driver, the cash flow just maybe any guidance you can give as far as reductions there rest of the year?.

Ryan?.

Yes, Joe thanks for the question. CMS for Q1 was a little bit disappointing. It wasn't as good as what we had in Q4 and as we said for our Q4 it was pretty small numbers so we're still down below the $100,000 mark for the quarter. It was less than 1% of our revenues for 4Q one.

So yes we still have some work to do there and as Brent mentioned earlier on in call we have hired someone to come in and really help focus our efforts on the CMS product.

Cam might be able to speak to this just briefly a little bit more but that person is a dedicated resource that we can have devote full time to CMS as opposed to kind of sharing BMS and CMS stuff.

Cam do you want to comment at all on that before I talk about working capital?.

You bet. So a few weeks ago actually a couple of months ago we decided that after we finished our cost reduction strategy or at least the phase that we finished that we were investing ourselves and bring someone in that was focused exclusively on CMS.

So with that we have made a higher approximately two weeks ago -- he has been on boarded, he comes with industry background in sales dealing with pumps, pipeline, very familiar with oil and gas.

Not a far stretch to train him on what we need to -- he is right there near Calgary, Alberta well hub so travel is lower and so we're excited to see what results he can help us bring almost some fresh eyes on the product and to come in and help us out with that and as we see value from this we will then investigate bringing this to our other region.

We had always hoped that our BMS sales team could do a CMS as well which they have to a degree. However with the fact that they are different contact. We want someone 100% focused on it. So we look forward to updating on our progress for sure. .

Thanks, Cam and then on the working capital side. I'm very pleased with what we've been able to do as a company for working capital in Q1 being able to continue to decrease our accounts receivable balances.

I don't know necessarily how much further we can really bring that balance down the key factor for us is really looking at our accounts over 90 days and what portion of the accounts receivable is falling into that category Historically in the past it's been around 30%, 32% of our accounts receivable balance at the end of Q1 we were down to 20%.

So I'm very pleased to see that number coming down and I'd love to continue to monitor that and push that 20% down even further. So again there may be a little bit of room there but probably not a significant amount of room from an overall working capital standpoint.

I think our biggest opportunity really still fits within the inventory balance, but again I'm very pleased to see that we've brought that down a $1 million in Q1.

I'd love to see that continue each quarter but I don't know if that's truly realistic, it depends on overall sales and within the market but we are confident that we can continue to fill a lot of orders out of what we've got in inventory now without bringing on new inventory at this point.

So again we've got a fair amount of runway there and I would love to see that number come down some more. So we're pushing our own ops team and our sales team to help us bring inventory down and hopefully see some more improvement there..

Okay. Thanks I'll turn it over..

Thanks, Joe..

The next question comes from [indiscernible]. Please go ahead..

Moring, Jim..

Thanks a lot.

Good morning how are you guys?.

Great..

Can you talk a little bit about pricing pressure for the 3100 and 2100 as well as whether customers are demanding better terms that kind of sounds like on the terms question if they're demanding it you're saying, no and if you’re able to keep your DSOs where they are and then secondly if Cam could talk a little bit about the -- what you think total addressable market is for the 3100 in the agricultural space? Thank you..

Cam, do you want to deal with both of those actually?.

Yes, you bet. So pricing pressure on the 3100 we've really had no pressure so far on the major projects that we've won so far major in terms of Profire is a different you know it's subjective of course but really we haven't had any pushback at per say. We have had questions on justification and things like that.

The only time we've ever really received pricing pressure on the 3100 is if somebody wants us to quote it on a application where the 2100 could do it and then there's obviously a difference in price there of at least 1.5 times the double depending on what they're trying to do. Some customers have still done it, but for the most part not.

With regards to just overall pricing pressure--.

Cam, can I interrupt you for a second?.

Absolutely..

I was trying to get at the pricing pressure for the 2100, excuse me, but that 3100 I just spoke..

Okay. No problem. Yes, with the 2100 it's still the same situation where customers are going to ask for and grind for a little bit.

We still pretty much [indiscernible] our major customers have been you know very supportive actually with working with us to leave things the way they are and in fact a couple customers have been very progressive in their thinking in my opinion sending out supplier letters saying basically don't give us any gift, don't feed us any food, no swag nothing.

We realize that this comes down to our cost and we don't want anything added to. So quite progressive in their thinking and we have had several of our major customers do this. So as of right now we haven't had to do any vast reductions.

Have we done some quantity discounts proposals for companies we have but nothing significant and nothing below any other discount that we’ve give previously on the discount side.

Does that answer your question?.

That does. Thank you.

And did we see total addressable market in agriculture?.

Sorry, I’ve written down here as well terms. Most of the time we have only given 30 days, now in oil and gas industry most of -- a lot of our customers don't pay until 60 or 90. However with that being that we have seen in the last little bit here some supplier or some customers that are basically dictating terms think we only pay at 45, 60 or 90.

So we'll have to see how that affects us but you know Ryan's team has done an incredible job of really keeping our overall accounts receivable in check.

So I don't expect this -- I don't think we're going to see a big change here but we’re starting to see from customers dictate and this is the big oil company terms, not necessarily pricing just terms.

As far as addressable market for grain dryers, it's still pretty new to know myself conducting a bit of the research on the drive fact from site you know down the [indiscernible] I saw at least couple dozen of them.

That being said how big the addressable market is across the United States I got to thing that is massive, however quantifying where we fit into that. There is competition already, a lot of the new grain dyers come out with I think fairly sophisticated technology. I don't know price point there. We're doing some research on that.

So as far as addressable total market I have nothing like wells drilled to put it towards I don't know how many grain dryers per thousand acres there are. So I don't have a great answer for you there yet, Jim..

The next question comes from [indiscernible] from Cole Capital. Please go ahead..

Good morning or good afternoon..

Thank you. And choose well [ph] I hope you enjoy the rest of the summer hopefully. Just two related questions, first one is for Mr.

Tidball, a conceptual question as you know typically when companies get larger going from 20 to 200 to larger number employees they're able to enhance the automation and professionalism and development and training in the organization.

Given the slowdown in the past 18 months can you give me a sense for how the company's been preparing and strengthening itself for the future.

So specifically 'm asking to what degree have you engaged in training, development, automation all those other sorts of things on the sales and marketing side so that coming out of the gate when business does improve as an organization you're going to run and operate far more effectively than you might have two years ago..

Great question. Have been with Profire almost for the 6.5, 7 years when I started and I hope nobody on the Profire team gets embarrassed by this but our quoting for example was done in Excel and our pricing was in my head and margins were you know it was a different ballgame there.

Now obviously we've made significant ground for the back and two years ago but in the last little while one of the things I'm most proud of what we've done, we've implemented our first CRM system which we've been -- we haven't had at Profire until literally the last two weeks which is now all of our contacts our customers, they're being managed in a centralized place where we don't lose any of them when we -- if we lose a sales person where we’re able to do marketing campaigns where we will be able to improve our SEO scores online and really start to get the traction we believe we deserve because we are the industry expert.

A little bit forward looking here we will be investing in ourselves to improving our online experience for our customers.

We've already begun Phase 1 of that with our current website that’s out, however we're looking to become really knowledge center for all things combustion related where if somebody puts something into Google a question the first thing that comes up is Profire and just our website but a white paper and a call to action where we can actually track who's looking at us, where we can go out and add some value to the customer.

So those are some of the things we've done, we've done some sales training.

We've done some time management training, things like that but again through this time we've tried to not spend a lot of money on these peripheral activities although we’re investing ourselves but we've been cautious with this but I do believe with things such as our CRM that it integrates with our ERP system it integrates with our online marketing, it integrates with our website.

I think we will be able to see some good things come around as the market turns..

Great. Thank you. And then the second question, maybe more of the finance side. You talked about how you believe the number of customers today is two or three times what it was maybe two years ago. As you know not all customers are created equal and sadly maybe some of these customers that might not even make it through this downturn.

Have you all gone look at your customer list today versus two, three years ago and look at the quality of the customers? What I mean by quality is a lot of it might be public and will disclose capital expenditures, number of wells, number of rigs that were active and midstream companies you know maybe miles of pipeline CapEx as well.

If you kind of look at that you'll quickly get a list of size and quality of customers and I'm just kind of curious if you look at that list, do you really see that big improvement versus two years ago?.

Yes that's a great question. We have definitely taken a pretty hard look at our overall credit policies within the organization and how we're tracking each of our customers..

All right. Just to interrupt for a second, it's not really a credit question, I'm really asking you in essence of the spending capacity of the customers as we get in 2017. '18 based on really how big they are and how healthy their balance sheets are as well. So it's more about spending power rather than will they pay their bills tomorrow..

That’s great, again we’re doing many things to look at the overall quality of our customers and essentially that's just what I was trying to get at it's not just one element but as you mentioned there are probably a lot of public metrics available for many of our customers that we can take a look at and we've started to take a look at some of those metrics, haven't necessarily gotten into all of the metrics that you have stated there or identified but we are definitely looking at our customers and their quality and Cam could probably even speak a little bit there and how our sales teams are evaluating what customers to target, which ones are capable of spending more at this point but overall we're trying to improve our entire process around customer reviews and what we're seeing there.

Cam?.

Yes one of the things we actually an exercise we just went through with all the sales team was them putting together their business plan, their top five, 10 producers in each of our 15 regions, sorry territories and we didn't have to go as far as the metrics of how many well and then again like you said what their budgets are and things like that.

But you look very closely at our end users and that's really what it all comes down to because they make the final call. We have significantly increased the number of end users. Now the quality of them, sales people are greedy.

They usually go after the companies that have multiple well, that are spending better completing, some of the other ones are left to the wayside. For example I think the D.J.

Basin, Colorado you can look on any number of websites and say that there's dozens of producers there, however there is only four that really do anything with respect to production of oil and gas and Profire has all four locked in.

That’s our focus in every area is to grab that companies that have the spend, that have the acreage, that have the well counts existing and the future potential, those who are acquiring for example the Anteros of the world who are buying a lots of acreage in the northeast, that's where we focus.

So -- if you’ve given me a great idea of size and quality of customers, I'm over to the metrics that we need to meet maybe focusing on but I hope that answers your question to a degree..

Great. Thank you. Best of luck..

Thanks so much..

The next question comes from William Bremer from Maxim Group. Please go ahead..

All right guys, just a quick follow-up.

Can you provide an update on the amount of sales and service personnel currently employed?.

Yes we certainly can. As of today the headcount, I'm just reading out my little list here. We have total employees 74. We have sales staff of 19 and service of 14 which is identical to what it was last quarter and roughly the same as March of '15 but down just slightly.

The whole point of that Bill is to try to keep trained sales and service people, in fact they training them as per the last call and focus on being prepared for when things do turn around.

We’re very optimistic that they will and we don't want to get caught having to train people for six months or a year after things do turn we want to be ready for that. So we have tried to maintain those numbers and actually they are responsible for keeping us where we are.

We've been in much worse position if we didn't have the quality of sales and service people we do right now ..

Hey, Brent that leads perfectly into my follow-up here in terms of the second half the more robust and much better performance.

Do you currently have those orders in place now or what provides you with that confidence that you're going to start to really implement and put those numbers up in the back half of this year?.

Well we rather than giving inherent guidance at the beginning of the year which we felt we were just really unable to because there are so many factors affecting the capital spend of the companies of these companies, of course the big one being commodity prices.

We have talked to the OEM groups the manufacturers of the equipment that our products go on, we talked to the producers themselves and generally speaking that is the response that we get from them that that they're projecting that if things stay in this somewhat of a growth area from the 20s where we were a while back to the 45 to 50 ranges Cam alluded to earlier when they hit 50 we had a significant number of requests for a quote over what we've been enjoying.

So all of those factors combined have given us a sense that it's probably going to be better, also typically and this is almost always the case towards the end of the year what budgets they do have they like to spend and so we could see in the last of this while third fiscal quarter but the last calendar quarter of the this year.

Typically we would see an increase in spend to get rid of in the case of these companies the budgets that they do have and prepare for next years..

Operator:.

. :.

Thank you. And thanks everyone for joining us today on this call to discuss the results of the first fiscal quarter of '17. We'd like to thank our loyal customers, our employees, our shareholders for their continued support and encouragement.

Please know that we are of course available to shareholders at any time to discuss questions or concerns that that you might have. Thank you. Have a great day everyone..

Again I would like to remind everybody that this call will be available for replay through August 18th starting later this evening via the link provided in today's press release and in the investor section of the company's website. Thank you ladies and gentlemen for joining us today for our presentation. You may now disconnect..