Good morning. Thank you all for joining us. My name is Will Schramm. I'm with Three Part Advisors. I have the pleasure of introducing Energy Services of America, trading on NASDAQ under the symbol ESOA. Presenting on behalf of the company today is CFO, Charles Crimmel, and CEO and President, Doug Reynolds.
Thank you. And thank you guys for coming in here to listen to tell you a little bit about our company. So Energy Services of America was a 2006 SPAC, and it started acquired three companies at that time, CJ Hughes, Nitro Construction, and S.T. Pipeline, and then pretty much proceeded to incinerate the investors' capital over the next couple of years, but since then, we... The new management team came in in 2012, the end of 2012. Closed one of the divisions, kind of reorganized the company in terms of getting forbearance agreements and kind of started growing the company back, and so currently we have six different divisions. We were originally union. We have several union and non-union businesses.
Currently have, over the last several years, have had, you know, substantial growth, both in our top line, bottom line, and EBITDA. As the charts show, you know, we are having our best year so far ever, so far for the nine months of this year. Our main area where we do business is in the Eastern United States. We're based in Huntington, West Virginia. Most of our distribution businesses, both water and gas, are in the kind of Louisville, down end of southern West Virginia, that area of the world. Our transmission businesses and our Nitro businesses go all over the Eastern United States. As I said, over the last couple of years, we've added several tuck-in acquisitions, started a general contracting company so that we could basically control our, not our construction services.
Our customers are some of the most biggest companies in the country, American Water, several gas companies, et cetera. Our main company is our CJ Hughes business. It's about half of the company's revenue. It does oil and gas transmission, gas, water distribution, and has over 600 employees, and it's based in Huntington. Our other business, which is one of the original companies, is our union electrical and construction services, Nitro Construction. One of their big areas is auto, and so over the last couple of years, we basically doubled the size of that business on new auto stuff, especially battery and electrification, CapEx spending. Currently, over the last year, we did...
Over the last two years, we've done large projects in Tennessee for Ford at the Blue Oval plant, and then this year we've just got started for Toyota down at the Liberty, North Carolina. Our general contracting business, we started several years ago after West Virginia and Kentucky got rid of right to work, and so we started a non-union GC to basically funnel to try to make sure we were capturing our market share of the commercial business in the electrical and our other Nitro businesses. It's been a good growth business, and so I get asked this, "What does paving have to do with pipeline construction? And so what are you guys doing there?" And so our Tri-State Paving business is a utility restoration paving company. We competed with them.
They're non-union, and so we purchased them several years ago. 90% of their business is water, well it's for water companies, mostly American Water. West Virginia Pipeline was another non-union water and natural gas distribution company that we acquired three years ago. It's probably our highest margin businesses, and so we've had considerable growth in those businesses. Our most recent acquisition, about two years ago, was Ryan Construction. They're into gas distribution. We purchased them in bankruptcy, so it's a little bit of a current. We're still working on that one. So our mission is to provide superior construction services in our markets. Skip the environmental. Charles, do you want to go ahead and do the financials?
Yeah. Hi, my name is Charles Crimmel. I'm the CFO of Energy Services of America. It's a great honor to be here today to present to everyone and tell you about our company. Energy Services of America, as Doug mentioned, we came off of our really, our best year in history last year. In fiscal year 2023, we did about $304 million in revenue. Ended up with a net income before tax of about $10 million. After tax, we ended up with a net income of about $7 million and an EBITDA of about $20 million.
And then, for this year, for our nine months end of June 30, right now we're at about $247 million in revenue, with income before tax of about $25 million. Now, included in that is a $15.6 million summary judgment that we were awarded and received from a former customer. But even without that money in there, so far, the nine months for June really been really, really strong for our company. So let me see. Here we go. So we kind of break out everything down to segregate our revenue into several different models. We have our gas and petroleum transmission work, which, if you think about that, that's gonna be more work that is over long distances.
I kinda liken it to think about the electrical grid. Transmission takes it long ways versus the distribution side, which takes it into the cities and takes it into people's houses. So primarily on the gas, petroleum side and transmission, we have our CJ Hughes company, last year making up around $96-$97 million. I'm sorry, that's the trailing 12 months. Last year made up about $92 million of that. Then we have our electrical, mechanical, and general contracting services, which kind of all of our companies have a little bit of a hand in that, but that's mostly gonna be Nitro Construction and SQP. They work more in... Nitro works in anywhere from automotive, chemical, power, steel manufacturing. SQP, as Doug mentioned, is our general contractor.
We kinda use that to get into more of the commercial side of the business, correctional facilities, new schools. We have courthouse projects we're working on, ADA sidewalks. What benefit, how that plays into everything else then, is then SQP can kind of bring Nitro along and use the HVAC, mechanical, electrical, fire protection services that Nitro has, and take them out of just solely working in the industrial side and bring them over to the commercial side of the business too. That's then represented by the orange part of the business there. You can see we've got a considerable amount of growth from 2022 to 2023 in this electrical, mechanical, and even in the trailing months there, trailing 12 months, we've got considerable growth in that business.
Then on the gas and water distribution side is primarily our CJ Hughes, West Virginia Pipeline, and of course, our paving company there, represent about $63 million for the Fiscal Year 2023, and about $73 million for the trailing 12 months. Water is a good portion of that work. It's a business that we love. Nobody's against clean water. Water pipes all across our region, where we work primarily in West Virginia, Charleston, West Virginia, over to rural Kentucky, over to Lexington and between, maybe up into Dayton, Ohio. Water pipes all across our region need replaced all the time, so it's a very, very good, safe, profitable business for us to be in, that we're looking to keep on growing that model business. Talk a little bit about backlog.
Backlog at June 30, 2024 was $251 million. Of that, probably expect about 75%-80% of that is probably gonna be earned in the next twelve months. Looking at that, the breakdown is roughly about probably about $80 million-$85 million, and that is the water work. Then the SQP, the general contractor, has got about $60 million in backlog. That's gonna be more so the commercial building side. And then Nitro has got about $80 million of backlog, and that's mostly gonna be a new EV battery plant they're working on in Liberty, North Carolina, for Toyota. They're just finishing up an EV battery plant just outside of Memphis called Blue Oval.
Doing the electrical side on the body shop, and also starting to get into work. There's a new steel manufacturing facility that's being built in a neighboring county to where Nitro is located, and so expect to see some a good portion of work coming from that also. You see our EBITDA margins here going back to 2014. So this is kind of the area back down here where obviously, Doug mentioned we kinda incinerated, had to start to rebuild the company. Came out of our forbearance period, and this was kinda roughly, you know, on the backs of Nitro and CJ at that point. Came in here, we hit a dip right here, had some trouble on some gas transmission projects and kinda decided, hey, we're gonna have to...
We gotta do something to diversify the company a little bit. And so as we start getting into these areas here, we're growing CJ, growing Nitro. In here is where we added the West Virginia Pipeline, which is you know very, very profitable, gas and water distribution, working mostly in southern West Virginia. They've got a very nice model there of having low competition and having great relationships with their customers. So it just makes them really, really profitable and efficient at what they do. See, down in here, this is kind of the beginning of COVID right here. We ended up that first COVID year in 2020 a lot of the companies especially...
transmission side, decided they were going to try to shove and get a lot of projects done at that point in time. So getting into COVID, we really didn't see too much with it. It was more of the year plus after COVID, you can see where we had the big drop there as companies started spending less money, pull back on their capital budgets. And towards 2022, we started to see coming out of that, 2022. Really, partly the startup and the acquisitions are adding to the growth. And we're also, what we're seeing is that Nitro and CJ have been very successful at taking advantage of new opportunities. For years, Nitro was a general contractor, a maintenance contractor, did probably in the neighborhood, anywhere between $45 million-$6 million worth of work.
Maintenance contract is, you know, it's good work. Being on the maintenance side, you're not going to make a whole lot of money at it, but you can keep people working. You can be there for when your customers are going to take on capital projects. So, you know, you're a Toyota every day, you know the plant better than they do. And then when they go in and they add a new transmission line or something like that, you're right there to do the work for them. It's been work, but they, you know, they know who takes care of them. So, Nitro has seen a very significant increase here during these periods then, of working on new construction projects.
And so that's largely kind of what we attribute then to the increase then of this adjusted margin: being able to take advantage of new construction projects and then add that on to the work we already have within the business, but without having to invest a whole lot more money into SG&A. We already... We had a lot of the people, a lot of the infrastructure in place. What we needed then was we needed the gravy on top. We needed the maintenance, or we needed more of the construction projects, and that's where Nitro and CJ have been very successful in the past year, plus getting that work. Capital allocation, where we're looking to spend our money. Of course, you know, we're always looking at new opportunities.
We did, of course, you know, West Virginia Pipeline, we finished that acquisition up towards the end of 2020. Tri-State Paving was an acquisition we did in the spring of 2022. Heritage Painting is a just a little small tuck-in acquisition we did that's gonna fall into, be absorbed by Nitro. Again, you know, with a lot of the stuff we do, people are gonna say: "Why, why buy a painting company? You do pipelines." Well, pipelines, you know, we run a lot of the fab work for CJ. The work they do gets ran through the Nitro fab shop. So we're doing the front-end fab shop work on Nitro, and we're doing... Then now we can do the painting and the coatings work also on that.
And then we can take Heritage and go to Dow, go to some of the other chemical plants, and be able to offer painting services there. Now, it's never gonna be big, but I think we can take a company that does $2 billion a year and probably grow it into something that makes, you know, $5 million-$8 million a year. Also, dividends. We have been paying dividends more frequently. So the past two years, we paid a $0.05 per share dividend at the end of 2022, and then at the end of 2023, beginning of 2024, we paid a $0.06 per share dividend. And so that, of course, you know, that's something we expect to keep on. Our board is very old school.
They believe that as long as we're making money, we need to give back to the investors. So the annual dividend is something we expect to keep up on. And we also have a share repurchase program. Over the years, I think we've taken in about $1.3 million of shares over the years. Now, 700+ of that has been directly from repurchasing shares. The board authorized us, I believe it was in July of 2022, to buy back about 1 million shares of the company stock. We're kind of strategic in the way we do it. You know, we kinda look at where the stock price is and kind of looking for the, you know, planning on that. At some point, there's gonna be fluctuations during the year.
So we set up a 10b5-1 program with our RBC, essentially our brokers there locally. Kind of give them discretion, full discretion to buy back within the boundaries that we set up for them. And with that, we'll open it up to any questions anyone has about Energy Services. Yes, sir.
So you kind of alluded to this a couple different times through the presentation, but for those of us that are new to the story, walk us through the different businesses, how they interact with each other, whether it's common customers-
Yep.
or common activities. As an outsider looking
...It mainly, I think that's a good description. So CJ Hughes then is our kind of flagship. This is the biggest of the companies. They're involved in. You know, we talked about the gas transmission, the petroleum transmission. This is a good example of what a good transmission project looks like, right? It's pretty flat land right there. You know, no hills, no streams, no, you know, this probably would be a dream section of a job right there. This is what a transmission job looks like when we talk about that. When we talk about water and gas transmission, that's gonna be more getting into the cities, towns.
It's gonna be taking it from the big pipes down to the little pipes and getting it into the system, getting it to people's houses, actually putting meters on people's houses. That's, that's what we talked about there.
Can I pause you there, if I may?
Yes.
So is it the same customer, the same utility that would be doing the transmission and the distribution, so you have that common, common area?
No, no.
Not generally.
Yeah, different. So like, and I'll kind of tie it back into the customer list then when we get there. So Nitro, as we said, Nitro does a lot of different type of work than what CJ does. There is some overlap there. As we mentioned, you know, Nitro has a great fab shop facility in which they can, you know, help CJ and get the pipe ready and spooled up and all that stuff, and get it shipped and get it to projects. To the point that sometimes even customers will just go directly to Nitro. Maybe it's not a CJ job, but maybe Nitro will still do the work for a gas company like TransCanada. So Nitro has some overlap there between Nitro and CJ Hughes.
In fact, there is a job I know they're gonna be working on in Virginia. I won't bore you with it. It's really kind of interesting hearing about it. I think that Nitro and CJ are going to be able to explore some new opportunities for them to work together. As I mentioned, the steel facility, you know, Nitro's got a great maintenance, you know, base in different industries, you know, to where they can go in and do electrical, mechanical stuff in the new steel plant that's being built. We're gonna be able to probably piggyback on CJ, as CJ does underground utilities. So be able to bring CJ, in this case, into an existing customer that Nitro has already developed.
So as mentioned, you know, Nitro does automotive, power, chemical, steel manufacturing. They do, you know, electrical side, they do the HVAC side, they can do equipment setting, do anything from fire protection to data and cable. They do a little bit of maybe some active shooter type of work in schools, so they've even got the the IT ability there, too. So there's Nitro's got probably, you get down to it, they've probably got about five, six different divisions, and even with that, you get down to subsidiaries of Nitro, in which they've got a data storage room. Which I don't know if you all are familiar with some, like these online poker type of places, wherever they have to, you know, store their data.
They've even got customers there that they lease out server space to, to store that type of stuff. They've got a new, not a new, but they've got a satellite office up in Battle Creek, Michigan, where you've got a lot of cereal plants, you've got automotive plants up there. So they're trying to working on developing a presence up in Michigan in that heavy industrial area. So there's a good amount of growth there. I don't know what that potentially could be. Could it grow from a $5 million a year company to a $20 million a year? Potential's there, but it's still kind of in its infancy right now. So SQP then is the general contractor.
And so being a general contractor, they're working more on, they call them verticals, right? They're. It's building. They can do building work, they can do elevator work, they can do civil work, they can do ADA sidewalks. It's a great business to be in. They can do all that type of work, and what they can do then is they can bring in Nitro to help out on the electrical side, the HVAC side, the fire protection side. So Nitro is not solely just an industrial or manufacturing type of contractor. They can also come in on the commercial side also. Where SQP can bring CJ Hughes in, is CJ can do some of the concrete work for them, foundation work, bring CJ Hughes in to do some of that.
Tri-State Paving, again, as Doug mentioned, this is the one that, you know, why do you have a paving company, right? But it makes perfect sense, because what happens is that what they're doing here is they're paving over an installation of a pipeline. So a distribution line could be two-inch, four-inch, six-inch distribution line of water going through a neighborhood to people's houses. They tear up the road. And so we found that we were losing money, not losing money, but losing work to a Tri-State Paving, because they were getting the paving contracts. And so that's when Doug and their contacts said: "You know what? We just need to buy them." And so that's what we did.
We bought them, so to be able to offer more services to our water customers than, and to be able to capitalize on doing the paving work.
You keep in mind, oftentimes, there are different costs. So Tri-State Paving is non-union, so they're gonna usually have a lower cost. Sometimes the customers want union, sometimes they don't. So we're trying to deliver a labor situation that the customers in each case want.
West Virginia Pipeline is very unique. We bought them. They were family-owned. It was two brothers. Two brothers owned it and ran it from 1963 . They had their own little niche down in southern West Virginia. They basically said, "You know what? Once we get to fifty people, we're done. We don't. We want no more." But they, at one point, I guess they got over fifty people and had a bad experience. They said, "Nope, we're done." When they decided to get out of the business, it was actually our customer, American Water, that called and said, "Hey, you guys need to look at this." And so Doug got the deal done. We bought West Virginia Pipeline. Now, those two brothers, that's Amy right there, who is the vice president.
She is the daughter of one of the brothers, and then her cousin, Michael, is the president of West Virginia Pipeline now. They do an absolute amazing work. They got great people. They make great margins. They have great relationships with their customers. They're in an area where kinda not a whole lot of competition. It's unique in the way that all their guys, primarily, you know, unless they're working in one of the other areas, but they all come in, and they drive into the shop in the morning, and they load up in the van and drive to the projects. All the guys come back at night. They don't. Nobody sleeps. You know, they always sleep in their bed every night. It's kind of the model that they've, they don't go very far.
They're very centrally located to where they are, but still, it works out well. Now, there's not really a whole lot of overlap with the other companies, other than they know, obviously, they know the same people within the same, you know, within the organizations, the Mountaineer Gas, and American Water.
They have the same customers as CJ Hughes.
Yes.
So they have basically three customers. Those are customers of CJ Hughes.
Yeah. And of course, Doug mentioned Ryan. Ryan is very much a work in process. Bought them out of bankruptcy. They offer services in the drilling. They can do fiber optic work. They can do directional drilling of water and gas lines. And so how this would work then is that, you know, the CJ Hughes had to get a job with American Water and say, "Hey, we gotta do a bore. We gotta go under a road. We gotta go under driveways. We gotta do this. Hey, Ryan, come in here and give us a price on doing the directional drilling for us." And they'll come in, and you can see here, you know, you're basically just taking pipe or running fiber optic, so you're not having to dig everything up.
You're just kinda shoving it up underground and popping it back up type of stuff. They also do some cathodic protection work, which is basically your integrity maintenance, your coating, your type of things involved in your gas lines. Basically, you know, it's a bad day when you gotta deal with a pipeline that explodes. And you know, as we have aging pipelines and such with our customers, they're always looking to, you know, they gotta make sure what they have in the ground is safe, not gonna cause them any problems. And that's what Ryan can do. Ryan will go and they'll do test readings at their stations for them. They'll look for abnormalities, and in the case of finding things, they can go in and fix things for the customer.
So like I said, we're still working on building that business. Now, how this ties... Sorry, maybe the customer list is up here. So obviously, so we've got American Water over here. We've got really, CJ can work for them. Nitro actually gets to work with American Water, West Virginia Pipeline, and Tri-State Paving. So we've got four companies that can work for American Water. Mountaineer Gas, really three of the companies, Nitro, CJ, and Nitro does a little bit of work for Mountaineer Gas, too. You know, we'll have American Electric Power there. CJ and Nitro can work for them. So it does look like we have kind of a hodgepodge of companies that we've thrown together for various reasons. There is overlap.
There is some synergies in what we do, but there's also diversification, too. So we're not totally reliant upon our gas customers to spend money. Our gas customers could cut their budget in half next year, and our water customers could, you know, supplement and get us through. So that's kind of the philosophy then of what we've been trying to do as a company, as you saw from that graph there, where we were down here in this area of when things go bad, you got nowhere else to go. So now we feel like our diversification gives us a place to go. Yes, sir?
Can you go to the chart of the graph of the years, every year? In May of 2023.
...2023, was that when you acquired Nitro and CJ ? Like, 2022, 2023, like, what happened at, from 2021 to 2023?
Um, so-
Were there acquisitions that happened?
So here, right around towards the tail end, really the beginning of 2021, is when we acquired West Virginia Pipeline. And then a few months later, maybe six months later after that, that's when we started up SQP. And then here in May of 2022, is when we added Tri-State Paving. But I think what we're seeing from here to here is. You know, anecdotally, when we talk to our guys, what they say is: "We have never seen this much opportunity, these amount of bids, the projects that are coming out right now." And they got to be selective on what they're doing, and they are very selective. They are looking at the projects that are going on in different areas. They're looking at the labor rates that are being paid.
They're thinking about, you know, "I don't have enough people here." They could go to Huntsville, Alabama, today and work. The customer wants, needs them down there, but there's no people in Huntsville to work. Yes, sir.
Is that a function that you think of, of the Infrastructure Act, that kind of thing?
No, I-
More opportunities out there, or is it just, you know, the need for expansion or replacement, or...?
There's been a need for a long time, but post-COVID, it's just money went to cities, counties. There definitely has been... That money's been flowing towards our customers. So whether it be schools that now have got some money to, you know, put in new HVAC or there is a lot of government money out there, and there still is, driving some of this.
To go a little bit and talk about what you were mentioning there about the stock price. So it was about, it was almost a year ago, at this time, we were trading in the $3 range, $3.50. We had been on NASDAQ for about, for a little over about a year and a half at that point. And we still hadn't been, you know, gotten into the good graces of NASDAQ enough to, for them to send me the letter that said, "Hey, you're up over $4 for five consecutive days. Good job. You're off the watch list," right? That happened, like, in October or November last year.
And so we, you know, we kinda did our first impromptu roadshow in New York City, in September, and the stock price, you know, we had a great day. By the time Doug landed the plane, we got people calling us and saying: "Hey, what are you guys doing? This is great." And I'm like: "We haven't even got off the airplane yet." And from there, it's been kind of a wild ride because we went from $3, $3.50, went up to $4. Once we got to $4, it just kinda bypassed $5 and went to $6.
And so we've been kinda stabilized in about, probably a few weeks ago, a month ago, we were kinda in the neighborhood of, you know, sub seven. You know, got up till we put out our earnings release and got up to... I'm sorry, we put out an 8-K that basically said we had been awarded a $15.6 million judgment and had received the money from a former customer, and that kind of brought the stock price up to about $7.50. And I think maybe even though that information was out there, I don't think people really kind of grasped it until earnings came out a few weeks ago, in mid-August.
And I think since then, we have seen a jump from being about $7.50 to the other day, we were up over $11. But to go along with that, I really feel like is that maybe people saw not just the judgment. I mean, we've disclosed it, you know, we've put it out there. It's been, that news has been out there for years. But I think maybe what they saw was, regardless of that, was the improvement, the increases on revenue and margin that we have made for the nine months of June thirtieth. So that's really what I'm excited about, is kind of where we're going from here. We've got a lot of great opportunities. And you know, we're always talking to customers.
There's always new work out there to be had, different stages. Some of it may be, you know, we're letter of intent, some of it may be not awarded yet. So, we really, really feel great about our opportunities coming in and really looking... You know, we feel like in the next year, two years, we really feel like it's gonna be able to hold up to what we're seeing now.