- Second quarter revenue increased $1.1 million, or 34%, to $4.5
million over the prior-year period
- Tool revenue grew 27% over the prior-year period and Contract
Services revenue was up 47%
- Strengthening balance sheet with $2.8 million in cash and $6.7
million in shareholders’ equity at quarter-end
- Secured strategic International channel partner in the Middle
East and North Africa
- The Company expects 2022 revenue of between $22 million to $25
million and Adjusted EBITDA* of $6 million to $8 million, which
includes the impact of the sale of the initial phase of the
existing DNR tool fleet to support Middle East demand.
*Adjusted EBITDA is a non-GAAP measure. See the Forward Looking
Non-GAAP Financial Measures discussion in this release.
Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or
the “Company”), a designer and manufacturer of drilling tool
technologies, today reported financial results for the second
quarter ended June 30, 2022.
“Our second quarter revenue growth reflected the continued
improvement in the oil & gas industry, our success with
obtaining additional business with existing customers, and the
increasing market for our flagship tool, the Drill-N-Ream®
(“DNR”),” commented Troy Meier, Chairman and CEO. “We have
continued to see favorable demand in our North America market, and
we are encouraged with the improving market conditions in the
Middle East. We believe there is significant demand for the DNR
internationally. Our recent announcement that Bin Zayed Petroleum
for Investment Ltd, one of the foremost global companies with broad
petroleum experience, will market and distribute our DNR to key end
markets in the Middle East and North Africa is a game-changing
event for us. We expect customers to adopt the technology quickly
given our new channel partner’s scale, customer reach and market
access.”
Mr. Meier added, “Our contract services business has been very
strong as we continue to expand the volume and products we
manufacture and refurbish for our long-time legacy customer.
Equally exciting, is the number of inquiries and discussions we are
having with other major industry players to leverage our
state-of-the-art drilling tool fabrication facility and expertise
to support their growth initiatives and strategies. Our efforts
going forward are focused on talent acquisition and retention, and
ensuring we have the necessary manufacturing capacity to capture
the incredible demand for our products and manufacturing
services.”
Second Quarter 2022 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands)
June 30,2022
March 31,2022 June 30,2021
ChangeSequential
ChangeYear/Year North America
4,021
3,745
2,941
7.4
%
36.7
%
International
520
385
458
34.9
%
13.5
%
Total Revenue
$
4,541
$
4,130
$
3,399
9.9
%
33.6
%
Tool Sales/Rental
$
1,147
$
1,049
1,120
9.3
%
2.4
%
Other Related Tool Revenue
1,745
1,720
1,153
1.4
%
51.3
%
Tool Revenue
2,892
2,769
2,273
4.4
%
27.2
%
Contract Services
1,649
1,361
1,126
21.2
%
46.5
%
Total Revenue
$
4,541
$
4,130
$
3,399
9.9
%
33.6
%
Revenue growth reflects the continued recovery in the North
America oil & gas industry and continued strong demand for the
manufacture and refurbishment of drill bits and other related
tools.
For the second quarter of 2022, North America revenue comprised
approximately 89% of total revenue, with remaining sales all within
the Middle East. Revenue in North America grew year-over-year from
increased Tool Revenue and strong growth in Contract Services. Over
the last year, International market growth has been at a slower
rate compared with the Company’s domestic market due to ongoing
pandemic-related restrictions, which have impacted travel, labor
recruitment and oil and gas industry investment.
Second Quarter 2022 Operating Costs
($ in thousands, except per share amounts)
June 30,2022
March 31,2022 June
30,2021 ChangeSequential
ChangeYear/Year Cost of revenue
$
2,116
$
1,768
$
1,224
19.7
%
72.9
%
As a percent of sales
46.6
%
42.8
%
36.0
%
Selling, general & administrative
$
1,894
$
1,647
$
1,473
15.0
%
28.6
%
As a percent of sales
41.7
%
39.9
%
43.3
%
Depreciation & amortization
$
403
$
411
$
586
(2.0
)%
(31.2
)%
Total operating expenses
$
4,413
$
3,825
$
3,283
15.4
%
34.4
%
Operating Income
$
128
$
305
$
116
(58.1
)%
9.8
%
As a % of sales
2.8
%
7.4
%
3.4
%
Other
(expense) income includingincome tax (expense)
$
(184
)
$
(155
)
$
(183
)
18.8
%
0.6
%
Net (loss) Income
$
(57
)
$
150
$
(67
)
(137.8
)%
(15.3
)%
Diluted (loss) income per share
$
(0.00
)
$
0.01
$
(0.00
)
(137.8
)%
(22.7
)%
Adjusted EBITDA(1)
$
831
$
1,014
$
957
(18.0
)%
(13.2
)%
As a % of sales
18.3
%
24.5
%
28.2
%
(1) Adjusted EBITDA is a non-GAAP measure defined as earnings
before interest, taxes, depreciation, and amortization, non-cash
stock compensation expense, and unusual items. See the attached
tables for important disclosures regarding SDP’s use of Adjusted
EBITDA, as well as a reconciliation of net loss to Adjusted
EBITDA.
The increase in the cost of revenue as a percent of revenue was
the result of global inflationary headwinds that affected payroll
expenses, raw material cost, supplies, and repair and maintenance
costs. In addition, the Company has expanded its workforce to
accommodate for its current and expected growth, with talent being
added in operations, quality, safety and general production support
areas.
Selling, general & administrative expenses were 41.7% of
revenue, an improvement of 160 basis points from the prior-year
period due to the leverage on higher sales volume. On a sequential
basis, the change in SG&A as a percent of revenue was
unfavorable due to inflation and higher stock-based compensation
expense as well an increase in professional fees.
Depreciation and amortization expense decreased approximately
31% year-over-year to $403 thousand as a result of fully amortizing
a portion of intangible assets and fully depreciating manufacturing
center equipment.
Balance Sheet and Liquidity
Cash at the end of the quarter was $2.8 million, comparable with
year-end 2021. Cash generated by operations for the year-to-date
period was $1.4 million compared with $335 thousand in the
prior-year period, largely reflecting the improvement in net
income. Capital expenditures were $1.2 million for the first six
months of 2022, which reflected machining capacity expansion, an
increase in maintenance, and an increase in the Company’s Middle
East DNR rental tool fleet. The comparable period in 2021 had $55
thousand of capital spending. The Company expects capital spending
for fiscal 2022 to range between $3 million to $4 million.
Total debt at quarter-end was $2.4 million, down 2% from
December 31, 2021. The Company has sufficient cash to pay off, and
expects to retire, the Hard Rock Note with its final $750 thousand
payment in October 2022.
2022 Outlook and Guidance
The Company’s expectations for 2022 are as follows:
Revenue: $22 million to $25 million
SG&A: $7.0 million to $7.3 million Adjusted
EBITDA: $6 million to $8 million
The full year 2022 expectations reflects the impact from the
sale of the $3.8 million stage one MENA DNR fleet to Bin Zayed
Petroleum in the third quarter of 2022. The Company expects third
quarter 2022 revenue will be $8 million to $9 million and Adjusted
EBITDA to range between $3.5 million to $4.0 million.
Mr. Meier concluded, “We are extremely encouraged with the
execution of our channel partner agreement with Bin Zayed for the
Middle East and North African markets. We believe this progress,
combined with our expanded relationship with our long-term legacy
customer, will position us well in the global oil & gas
industry as we prepare to move into 2023.”
Webcast and Conference Call
The Company will host a conference call and live webcast today
at 10:00 am MT (12:00 pm ET) to review the results of the quarter
and discuss its corporate strategy and outlook. The discussion will
be accompanied by a slide presentation that will be made available
prior to the conference call on SDP’s website at
www.sdpi.com/events. A question-and-answer session will follow the
formal presentation.
The conference call can be accessed by calling (201) 689-8470.
Alternatively, the webcast can be monitored at www.sdpi.com/events.
A telephonic replay will be available from 1:00 p.m. MT (3:00 p.m.
ET) the day of the teleconference until Friday, August 19, 2022. To
listen to the archived call, please call (412) 317-6671 and enter
conference ID number 13731267 or access the webcast replay at
www.sdpi.com, where a transcript will be posted once available.
Definitions and Composition of Product/Service
Revenue:
Contract Services revenue is comprised of repair and
manufacturing services for drill bits and other tools or products
for customers.
Other Related Tool Revenue is comprised of royalties and fleet
maintenance fees.
Tool Sales/Rental revenue is comprised of revenue from either
the sale or rent of tools to customers.
Tool Revenue is the sum of Other Related Tool Revenue and Tool
Sales/Rental revenue.
About Superior Drilling Products, Inc.
Superior Drilling Products, Inc. is an innovative, cutting-edge
drilling tool technology company providing cost saving solutions
that drive production efficiencies for the oil and natural gas
drilling industry. The Company designs, manufactures, repairs and
sells drilling tools. SDP drilling solutions include the patented
Drill-N-Ream® wellbore conditioning tool and the patented Strider™
oscillation system technology. In addition, SDP is a manufacturer
and refurbisher of PDC (polycrystalline diamond compact) drill bits
for a leading oil field service company. SDP operates a
state-of-the-art drill tool fabrication facility, where it
manufactures its solutions for the drilling industry, as well as
customers’ custom products. The Company’s strategy for growth is to
leverage its expertise in drill tool technology and innovative,
precision machining in order to broaden its product offerings and
solutions for the oil and gas industry.
Additional information about the Company can be found at:
www.sdpi.com.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements and
information that are subject to a number of risks and
uncertainties, many of which are beyond our control. All
statements, other than statements of historical fact included in
this release, including, without limitations, the continued impact
of COVID-19 on the business, the Company’s strategy, future
operations, success at developing future tools, the Company’s
effectiveness at executing its business strategy and plans,
financial position, estimated revenue and losses, projected costs,
prospects, plans and objectives of management, and ability to
outperform are forward-looking statements. The use of words
“could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,”
“may,” “continue,” “predict,” “potential,” “project”, “forecast,”
“should” or “plan, and similar expressions are intended to identify
forward-looking statements, although not all forward -looking
statements contain such identifying words. These statements reflect
the beliefs and expectations of the Company and are subject to
risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties include, among other
factors, the duration of the COVID-19 pandemic and related impact
on the oil and natural gas industry, the effectiveness of success
at expansion in the Middle East, options available for market
channels in North America, the deferral of the commercialization of
the Strider technology, the success of the Company’s business
strategy and prospects for growth; the market success of the
Company’s specialized tools, effectiveness of its sales efforts,
its cash flow and liquidity; financial projections and actual
operating results; the amount, nature and timing of capital
expenditures; the availability and terms of capital; competition
and government regulations; and general economic conditions. These
and other factors could adversely affect the outcome and financial
effects of the Company’s plans and described herein. The Company
undertakes no obligation to revise or update any forward-looking
statements to reflect events or circumstances after the date
hereof.
Forward Looking Non-GAAP Financial Measures
Forward-looking adjusted EBITDA is a non-GAAP measure. The
Company is unable to present a quantitative reconciliation of these
forward-looking non-GAAP financial measures to their most directly
comparable forward-looking GAAP financial measure because such
information is not available, and management cannot reliably
predict the necessary components of such GAAP measures without
unreasonable effort largely because forecasting or predicting our
future operating results is subject to many factors out of our
control or not readily predictable. In addition, the Company
believes that such reconciliations would imply a degree of
precision that would be confusing or misleading to investors. The
unavailable information could have a significant impact on the
Company’s fiscal 2022 and future financial results. This non-GAAP
financial measure is a preliminary estimate and is subject to risks
and uncertainties, including, among others, changes in connection
with purchase accounting, quarter-end and year-end adjustments. Any
variation between the Company’s actual results and preliminary
financial data set forth in this presentation may be material.
FINANCIAL TABLES FOLLOW.
Superior Drilling Products, Inc. Consolidated Condensed
Statements Of Operations (unaudited)
For the Three
Months For the Six Months Ended June 30, Ended
June 30,
2022
2021
2022
2021
Revenue North America
$
4,021,118
$
2,941,056
$
7,766,132
$
5,033,255
International
519,724
458,053
904,874
790,506
Total revenue
$
4,540,842
$
3,399,109
$
8,671,007
$
5,823,761
Operating cost and expenses Cost of revenue
2,116,096
1,224,179
3,883,995
2,399,772
Selling, general, and administrative expenses
1,894,403
1,473,081
3,541,051
2,988,670
Depreciation and amortization expense
402,648
585,504
813,379
1,275,577
Total operating costs and expenses
4,413,147
3,282,764
8,238,425
6,664,019
Operating Income (loss)
127,695
116,345
432,582
(840,258
)
Other Income (expense) Interest income
2,978
50
3,176
98
Interest expense
(132,738
)
(145,521
)
(256,600
)
(283,577
)
Net gain/(loss) on sale or disposition of assets
(22,146
)
(11,187
)
(22,146
)
(1,187
)
Total other expense
(151,906
)
(156,658
)
(275,570
)
(284,666
)
(Loss) Income before income taxes
(24,211
)
(40,313
)
157,012
(1,124,924
)
Income tax expense
(32,299
)
(26,468
)
(63,752
)
(43,649
)
Net (loss) income
$
(56,510
)
$
(66,781
)
$
93,260
$
(1,168,573
)
Basic income (loss) per common share
$
(0.00
)
$
(0.00
)
$
0.00
$
(0.05
)
Basic weighted average common shares outstanding
28,235,001
25,762,342
28,235,001
25,762,342
Diluted income (loss) per common Share
$
(0.00
)
$
(0.00
)
$
0.00
$
(0.05
)
Diluted weighted average common shares outstanding
28,235,001
25,762,342
28,305,101
25,762,342
Superior Drilling Products, Inc. Consolidated Condensed
Balance Sheets June 30, 2022
December 31, 2021 (unaudited)
Assets
Current assets: Cash $
2,827,426
$
2,822,100
Accounts receivable, net
2,799,480
2,871,932
Prepaid expenses
643,155
435,595
Inventories
1,324,724
1,174,635
Other current assets
88,588
55,159
Total current assets
7,683,373
7,359,421
Property, plant and equipment, net
7,426,690
6,930,329
Intangible assets, net
152,778
236,111
Right of use Asset (net of amortization)
160,301
20,518
Other noncurrent assets
110,519
65,880
Total assets $
15,533,661
$
14,612,259
Liabilities and Owners' Equity Current
liabilities: Accounts payable $
1,095,552
$
1,139,091
Accrued expenses
853,194
467,462
Accrued Income tax
219,912
206,490
Current portion of Operating Lease Liability
160,301
13,716
Current portion of Long-term Financial Obligation
70,025
65,678
Current portion of long-term debt, net of discounts
2,204,508
2,195,759
Total current liabilities
4,603,492
4,088,196
Operating Lease Liability
-
6,802
Long-term Financial Obligation
4,075,778
4,112,658
Long-term debt, less current portion, net of discounts
190,533
256,675
Total liabilities
8,869,803
8,464,331
Shareholders' equity Common stock (28,235,001 and
25,762,342)
28,235
28,235
Additional paid-in-capital
43,493,802
43,071,201
Accumulated deficit
(36,858,248
)
(36,951,508
)
Total shareholders' equity
6,663,789
6,147,928
Total liabilities and shareholders' equity
$
15,533,661
$
14,612,259
Superior Drilling Products, Inc. Consolidated Condensed
Statement of Cash Flows (Unaudited)
For
the Six Months Ended June 30,
2022
2021
Cash Flows From Operating Activities Net Income
(Loss) $
93,329
$
(1,168,573
)
Adjustments to reconcile net income to net cash used in operating
activities: Depreciation and amortization expense
813,379
1,275,575
Stock-based compensation expense
422,601
334,505
Loss on sale or disposition of assets, net
22,146
1,187
Amortization of deferred loan cost
9,262
9,262
Changes in operating assets and liabilities: Accounts
receivable
72,452
(584,780
)
Inventories
(149,223
)
(161,566
)
Prepaid expenses and other current and noncurrent assets
(285,628
)
(280,814
)
Accounts payable and accrued expenses
342,193
877,585
Income Tax expense
13,422
32,149
Net Cash Provided By Operating Activities
1,353,933
334,530
Cash Flows From Investing Activities
Purchases of property, plant and equipment
(1,249,419
)
54,780
Proceeds from sale of fixed assets
-
50,000
Net Cash Provided By (Used In) Investing Activities
(1,249,419
)
104,780
Cash Flows From Financing Activities
Principal payments on debt
(281,487
)
(266,719
)
Proceeds received from debt borrowings
182,318
-
Payments on revolving loan
(553,650
)
(513,897
)
Proceeds received from revolving loan
553,631
1,068,978
Net Cash Used In Financing Activities
(99,188
)
288,362
Net change in Cash
5,326
727,672
Cash at Beginning of Period
2,822,100
1,961,441
Cash at End of Period $
2,827,426
$
2,689,113
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
($, in thousands)
Three Months Ended June 30,
2022 June 20, 2021 March
31, 2022 GAAP net (loss) income
$
(56,510
)
$
(66,781
)
$
149,837
Add back: Depreciation and amortization
402,648
585,504
410,733
Interest expense, net
129,760
145,471
123,664
Share-based compensation
212,469
167,033
210,133
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
32,299
26,468
31,384
(Gain) Loss on disposition of assets
22,146
11,187
-
Non-GAAP adjusted EBITDA(1)
$
831,012
$
957,081
$
1,013,951
GAAP Revenue
$
4,540,842
$
3,399,109
$
4,130,164
Non-GAAP Adjusted EBITDA Margin
18.3
%
28.2
%
24.5
%
(1) Adjusted EBITDA represents net income adjusted for income
taxes, interest, depreciation and amortization and other items as
noted in the reconciliation table. The Company believes Adjusted
EBITDA is an important supplemental measure of operating
performance and uses it to assess performance and inform operating
decisions. However, Adjusted EBITDA is not a GAAP financial
measure. The Company’s calculation of Adjusted EBITDA should not be
used as a substitute for GAAP measures of performance, including
net cash provided by operations, operating income and net income.
The Company’s method of calculating Adjusted EBITDA may vary
substantially from the methods used by other companies and
investors are cautioned not to rely unduly on it.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220812005049/en/
For more information, contact investor relations: Deborah
K. Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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