CES Energy Solutions Corp. (CEU) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of CES Energy Solutions Corp. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of the same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtain all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. It is now my pleasure to turn today's meeting over to Mr. Matthew Bell, Corporate Secretary for the company. Mr. Bell, the floor is yours.

Thank you for joining us today. My name is Matthew Bell, and I'm the Corporate Secretary for CES Energy Solutions Corp., and I will act as Secretary for the meeting. Before we begin, we would like to provide a brief overview of the Computershare virtual meeting platform. You should now see the agenda on your screen. At the top right corner of the page, you will see different tabs or icons that you may click on to access different parts of the platform. If you have accessed the meeting with a control number or invite code, you may ask a question at any time by clicking the Q&A tab as well as to vote in real time if you have not already done so by clicking on the Vote tab. If you have already voted, there is no need to vote again unless you wish to change your vote. The Broadcast tab will not be enabled for this meeting as there is not a PowerPoint presentation that will be presented at the end of the meeting. For convenience, we have divided today's meeting into 2 parts. Our Chairman, Mr. Phil Scherman, will conduct the first part of the meeting dealing solely with the legal requirements for the meeting. After we conclude the legal part of the meeting, Mr. Ken Zinger, President and CEO, will provide a corporate update. In order to ensure that the meeting covers the required business in an efficient manner, we have prearranged with designated shareholders and proxyholders to move and to second the motions of business. Thank you, and I will now turn it over to our Chairman, Mr. Phil Scherman.

Good morning, and welcome to the Virtual Annual General Meeting of the Holders of Common Shares of CES Energy Solutions Corp. My name is Phil Scherman, and I am Chairman of CES Energy Solutions. I will now call to order the Annual General Meeting of Shareholders of CES Energy Solutions. I will preside as Chair of the meeting; Mr. Bell will act as Secretary of the meeting; and Ms. Jennifer Oliver of Computershare will act as scrutineer. The notice calling this meeting of shareholders was mailed to all shareholders in advance of the meeting and is dated May 11, 2023. I would request that the Secretary keep the proof of mailing of the notice of the meeting information circular and form of proxy to the registered shareholders of the corporation with the records of this meeting. The bylaws of the corporation provide that a quorum exists if at least 2 holders representing at least 5% of the shares entitled to be voted at the meeting are present in person or represented by proxy. It has been confirmed to me by the scrutineers that quorum has been met and 61.74% of the issued and outstanding common shares are being represented at this meeting. Accordingly, I declare that the meeting is regularly called and properly constituted for the transaction of business. I will now explain the voting procedures to be used at today's meeting. We have received all proxy voting results for today's resolutions in advance of this meeting. Anyone in attendance who has not yet voted and is not signed in as a guest will have an opportunity to vote online in real time using the virtual meeting platform. Rather than hold up the business of this meeting for the final tabulation of votes cast on each motion, I will be providing the interim results received from the scrutineer in advance of this meeting on each of the motions presented. I have directed that the final combined results of the advanced poll and the votes entered through the virtual platform on all motions today be included with the minutes of the meeting. These results will also be available in the report on voting results posted on SEDAR following the termination of this meeting. The polls are now open. So the first item of business is the presentation of the financial statements of the corporation for the fiscal period ended December 31, 2022, and the report of the auditors thereon. Copies of the financial statements, including the report of the auditors thereon are available at this meeting and have been posted on the corporation's website and filed on SEDAR. As no action is required to be taken by the shareholders on the financial statements, I now declare that the financial statements of the corporation for the fiscal period ended December 31, 2022, and the report of the auditors thereon have been received by the shareholders and submitted to this meeting. The next item of business is to fix the number of directors to be elected at the meeting. May I please have a motion to fix the number of directors to be elected at the meeting at 8.

I so move.

I second the motion.

Are there any questions on this motion?

There are none.

Thank you, Mr. Bell. Seeing there are no questions, we will proceed to the scrutineer's report. According to the report, the results of the vote to fix the number of shareholders of directors at 8 are 99.45% for, 0.5% against. I declare the motion carried. The next item of business is the election of directors. Corporation has nominated 8 directors for election and has not received any nominations from shareholders pursuant to the bylaws of the corporation. The 8 nominated directors are set out in the corporation's management information circular, and they are Mr. Spencer Armour, III, Ms. Stella Cosby, Mr. John Hooks, Mr. Ian Hardacre, Mr. Kyle Kitagawa, Mr. Joseph Wright and Mr. Ken Zinger, and myself, Phil Scherman. May I now have a motion from the floor to the elect -- to elect the nominees as directors of the corporation to hold office until the next election of directors or until their successors are appointed.

I so move. I second the motion.

So are there any questions on this motion?

There are none.

Thank you, Bell. Seeing that there are no objections, we will proceed to the scrutineer's report. According to the report, the voting results are as follows: Mr. Armour, 95.65% for, 4.35% withheld; Stella Cosby, 90.17% for, 9.83% withheld; John Hooks, 88.55% for, 11.45% withheld; Ian Hardacre, 99.21% for, 0.79% withheld; Kyle Kitagawa, 98.87% for, 1.13% withheld; Edwin Joseph Wright, 99.21% for, 0.79% withheld; Mr. Zinger, 99.01% for, 0.99% withheld; and for myself, 99.17% for, 0.83% withheld. I'd like to remind you that the CES majority voting policy requires that each director nominee receive 50% or more of the votes cast. As I see that all directors have received more than 50%, I declare that the 8 nominees have been duly elected as directors of CES Energy Solutions for the upcoming year. As previously noted, the final voting results for each director will be available on SEDAR subsequent to this meeting and will also be disclosed by press release. The next item of business is the approval of unallocated restricted share units under the RSU Plan. May I have a motion to ratify and approve the unallocated restricted share units.

I so move.

I second the motion.

Are there any questions on this motion?

There are none.

Thank you, Matthew. Seeing there are no questions, we'll proceed to the scrutineer's report. According to the report, the results of the vote to approve the unallocated restricted share units under the RSU Plan are as follows: 98.64% for, 1.36% against. I declare the motion carried. The final item of business at today's meeting is the appointment of auditors for the corporation. May I have a motion that Deloitte LLP be appointed auditors of the corporation until the next Annual Meeting of Shareholders or until a successor is appointed and the directors of the corporation be authorized to fix their remuneration.

I so move. I second the motion.

Again, are there any questions on this motion, Mr. Bell?

There are none.

Thank you. We will proceed to the scrutineer's report. According to the report, the results of the vote to appoint Deloitte LLP as auditors of the corporation are as follows: 94.28% for, 5.72% withheld. I declare the motion carried. As there is no further scheduled business to be brought before this meeting, this will serve as a 1-minute warning prior to the polls being closed. If you are voting through the virtual platform, please ensure that your votes are recorded. We'll now pause for 1 minute. [Voting]

Mr. Bell, the polls are now closed, I take it?

Correct.

Thank you. So unless there is any other business to be brought forward, we will now proceed to conclude the formal portion of the meeting. I'll pause for a moment to see if there are -- is there any other business to be brought forward?

There does not appear to be.

Okay. Thank you. We'll now entertain a motion to end the meeting.

I move that the meeting be terminated.

I second the motion.

Do we have any objections to termination?

Not seeing any.

Thank you. I declare the meeting to be terminated. Ken Zinger will now proceed with the presentation portion of the meeting and provide a brief corporate update. Thank you for attending the meeting. Over to you, Mr. Zinger.

Thank you, Phil. Good morning, everyone, and thank you for joining us today. This past year was one filled with initial challenges followed by growth and optimism as we took the company to record financial levels that we have never experienced before. While the usual challenges in our business have persisted, I'm proud to report that our entire team across North America has risen above them. We have overcome labor shortages, massive cost inflation, supply chain challenges and natural disasters. Throughout all of these events, our employees at every level have found a way to not only persevere but to thrive. In 2022, our company significantly surpassed its prior record revenue of $1.27 billion from 2019 by 34% with $1.92 billion. I'm happy to report that so far in 2023, we are on a path to eclipse that record as well as we are tracking revenue to be well north of $2 billion for this year, a far cry from the annualized revenue of just $55 million during our first public year back in 2006. This translates to a massive growth in annual revenue over the past 17 years of approximately 40 times. From a scale perspective, we have become one of the preeminent chemical solution providers in the North American land markets in which our 4 main divisions participate. In drilling fluids, CES continues to be the #1 supplier to the Canadian market at around a 35% market share. In the United States, AES has now grown to be roughly tied for first place in the U.S. land market with Halliburton at around 20% of the market. On the production chemicals side of the business, we now estimate that JACAM Catalyst is the second biggest provider in the United States land market and that PureChem is tied for #1 in Canada. Lofty status for markets that used to be dominated by the big 3 U.S. oilfield services company. Perhaps the greatest testament to the success of CES is the overall number of people that make their living and provide for their families by working here at CES. When we took the company public back in March of 2006, we had just 41 Canadian employees on staff. Today, I'm very proud to report that we now have a total of 2,183 employees, comprised of 655 employees in Canada as well as 1,528 employees in the United States. The responsibility that comes with this accomplishment is not lost on myself, management nor the Board of Directors. We are committed to continuing to run the company with the same sustainable and responsible strategy that we have since we took the company public 17 years ago. I will -- we will continue to grow responsibly while always managing our finances with the future in mind. We will continue to focus on our strategy on finding the best possible balance between our employees, our customers and our investors. Our accomplishments to date and this strategy would not have been possible without the people and culture that are present every day here at CES. I'm very proud to lead this organization now and for the coming years. Thank you to everyone who works for us, works with us and trust their investments in us. We appreciate your vote of confidence, and we will continue to commit to always doing our best to honor it and earn it. With that said, I will now pass the call back to the operator.

This concludes the meeting. You may now disconnect.