- Third quarter revenue grew to $3.6 million, up $2.0 million
over the prior-year period and up $163 thousand sequentially
- North America revenue was up 172% and International revenue
increased 22% over prior-year period on greater market penetration
and improving market conditions
- Achieved break-even earnings per diluted share with net loss of
$6 thousand compared with net loss of $1.7 million
- Adjusted EBITDA* was $853 thousand or 23.9% as a percent of
revenue
- Strengthened balance sheet subsequent to quarter end with $1.7
million of net proceeds from offering
*Adjusted EBITDA is a non-GAAP measure. See comments regarding
the use of non-GAAP measures and the reconciliation of GAAP to
non-GAAP measures in the tables of this release
Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or
the “Company”), a designer and manufacturer of drilling tool
technologies, today reported financial results for the third
quarter of 2021 ended September 30, 2021.
Troy Meier, Chairman and CEO, commented, “Demand for our tools
and services is strong and we are working hard to meet our
customers’ requirements. We are confident in the value our flagship
Drill-N-Ream® well bore conditioning tool brings to the oil &
gas production industry. Importantly, our engineering expertise and
manufacturing skills are in demand. We are addressing new
opportunities to manufacture drilling tools to meet the rising
demand and challenging technical requirements of polycrystalline
diamond cutters. We believe technical knowledge of drilling
technologies, operational strengths and ability to meet demand
provide us competitive advantages in these challenging times of
severe supply chain constraints and labor shortages.”
Third Quarter 2021 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands, except per share amounts)
September 30,2021
June 30,2021 September 30,2020
ChangeSequential ChangeYear/Year North America
3,041
2,941
1,118
3.4
%
172.0
%
International
521
458
429
13.8
%
21.5
%
Total Revenue
$
3,562
$
3,399
$
1,547
4.8
%
130.2
%
Tool Sales/Rental
$
836
$
1,120
549
(25.4
)%
52.3
%
Other Related Tool Revenue
1,510
1,153
642
31.0
%
135.2
%
Tool Revenue
2,346
2,273
1,191
3.2
%
97.0
%
Contract Services
1,216
1,126
357
8.0
%
240.6
%
Total Revenue
$
3,562
$
3,399
$
1,547
4.8
%
130.3
%
Revenue increased sequentially $163 thousand, or 5%, and $2.0
million, or 130%, year-over-year. Improvements over both periods
reflects higher demand as oil and gas production markets continued
to improve and as the Company gains greater market presence.
For the third quarter 2021, approximately 85% of revenue was
from North America and approximately 15% from International
markets, all within the Middle East. Revenue in North America grew
year-over-year from increased tool sales and rentals as well as
higher royalty and repair fees. International revenue growth
reflects growing market penetration including increased demand from
a new International customer gained in the second quarter. Contract
Services revenue improved sequentially and year-over-year,
reflecting higher demand for both new drilling tools and
refurbishments.
Third Quarter 2021 Operating Costs
($ in thousands, except per share amounts)
September 30,2021
June 30,2021 September 30,2020
ChangeSequential ChangeYear/Year Cost of revenue
$
1,442
$
1,224
$
871
17.8
%
65.6
%
As a percent of sales
40.5
%
36.0
%
56.3
%
Selling, general & administrative
$
1,551
$
1,473
$
1,530
5.3
%
1.4
%
As a percent of sales
43.6
%
43.3
%
98.9
%
Depreciation & amortization
$
405
$
586
$
693
(30.8
)%
(41.5
)%
Total operating expenses
$
3,399
$
3,283
$
3,094
3.5
%
9.9
%
Operating Income (loss)
$
163
$
116
$
(1,546
)
40.8
%
110.6
%
As a % of sales
4.6
%
3.4
%
(99.9
)%
Other (expense) income including income tax (expense)
$
(169
)
$
(183
)
$
(185
)
NM
NM
Net loss
$
(6
)
$
(67
)
$
(1,731
)
NM
NM
Diluted loss per share
$
(0.00
)
$
(0.00
)
$
(0.07
)
NM
NM
Adjusted EBITDA(1)
$
853
$
957
$
(607
)
(10.9
)%
NM
As a % of sales
23.9
%
28.2
%
(39.2
)%
(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.
Higher costs associated with International sales impacted the
cost of revenue. Nonetheless, strong operating leverage from higher
volume and continued effective management of costs resulted in a
measurable improvement of operating income to $163 thousand, or
4.6% of sales.
Improved operating income and lower tax expense resulted in
breakeven results with a net loss of $6 thousand. The decrease in
income tax expense from the prior year was due to a decrease in
income in foreign jurisdictions. Adjusted EBITDA(1) improved
year-over-year to $853 thousand as a result of increased sales and
operating leverage gained from higher volume, while Adjusted EBITDA
margin expanded to 23.9%.
The Company believes that when used in conjunction with measures
prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”), Adjusted EBITDA, which is a non-GAAP measure,
helps in the understanding of its operating performance.
Balance Sheet and Liquidity
Cash at the end of the quarter was $2.5 million, up $508
thousand from the end of 2020. Cash provided by operations in the
nine months ended September 30, 2021 was $878 thousand. Long-term
debt, including the current portion, at quarter-end was $2.6
million, which reflects a principal payment of $750 thousand made
on the Hard Rock note during the period. The remaining $750
thousand of principal due on the note is payable on October 5,
2022.
Subsequent to quarter-end, in October 2021, the Company
completed an equity offering of 1,739,131 shares of common stock at
a price of $1.15 per share. This resulted in net proceeds of
approximately $1.7 million to be used for general corporate
purposes, which may include capital expenditures, repayment or
refinancing of indebtedness, acquisition and repurchases or
redemptions of securities.
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.
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, November 19, 2021.
To listen to the archived call, please call (412) 317-6671 and
enter conference ID number 13723735, or access the webcast replay
at www.sdpi.com, where a transcript will be posted once
available.
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® well bore 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.
FINANCIAL TABLES FOLLOW.
Superior Drilling Products,
Inc.
Consolidated Condensed
Statements of Operations
(unaudited)
For the Three Months
For the Nine Months
Ended September 30,
Ended September 30,
2021
2020
2021
2020
Revenue North America
$
3,040,691
$
1,211,987
$
8,073,945
$
7,816,885
International
521,229
335,455
1,311,735
1,112,708
Total revenue
$
3,561,919
$
1,547,442
$
9,385,680
$
8,929,593
Operating cost and expenses Cost of revenue
1,441,943
870,655
3,841,713
4,284,716
Selling, general, and administrative expenses
1,551,462
1,529,887
4,540,134
4,887,999
Depreciation and amortization expense
405,225
693,259
1,680,804
2,134,398
Total operating costs and expenses
3,398,630
3,093,801
10,062,651
11,307,113
Operating Income (loss)
163,289
(1,546,359
)
(676,971
)
(2,377,520
)
Other income (expense) Interest income
49
145
147
5,775
Interest expense
(130,221
)
(126,482
)
(413,798
)
(450,210
)
Loss on Fixed Asset Impairment
-
-
10,000
(30,000
)
Net gain/(loss) on sale or disposition of assets
-
-
(11,187
)
142,234
Loan Forgiveness
-
41,403
-
41,403
Total other expense
(130,172
)
(84,934
)
(414,838
)
(290,798
)
Loss before income taxes
$
33,117
$
(1,631,293
)
$
(1,091,809
)
$
(2,668,318
)
Income tax expense
(39,327
)
(99,979
)
(82,976
)
(106,414
)
Net loss
$
(6,210
)
$
(1,731,272
)
$
(1,174,785
)
$
(2,774,732
)
Basic loss per common share
$
(0.00
)
$
(0.07
)
$
(0.05
)
$
(0.11
)
Basic weighted average common shares outstanding
26,154,202
25,555,167
25,894,397
25,469,609
Diluted loss per common Share
$
(0.00
)
$
(0.07
)
$
(0.05
)
$
(0.11
)
Diluted weighted average common shares outstanding
26,195,659
25,555,167
25,894,397
25,469,609
Superior Drilling Products,
Inc.
Consolidated Condensed Balance
Sheets
September 30, 2021
December 31, 2020
(unaudited)
Assets Current assets: Cash $
2,469,398
$
1,961,441
Accounts receivable, net
2,046,073
1,345,622
Prepaid expenses
266,371
90,269
Inventories
1,067,738
1,020,008
Asset held for sale
-
40,000
Other current assets
47,692
40,620
Total current assets
5,897,272
4,497,960
Property, plant and equipment, net
6,963,777
7,535,098
Intangible assets, net
277,778
819,444
Right of use Asset (net of amortizaton)
$
22,192
$
99,831
Other noncurrent assets
65,880
87,490
Total assets $
13,226,899
$
13,039,823
Liabilities and Owners' Equity Current liabilities:
Accounts payable $
802,160
$
430,014
Accrued expenses
1,887,690
1,091,519
Accrued Income tax
177,822
106,446
Current portion of Operating Lease Liability
13,832
79,313
Current portion of Long-term Financial Obligation
63,561
61,691
Current portion of long-term debt, net of discounts
1,445,230
1,397,337
Total current liabilities $
4,390,295
$
3,166,320
Operating long term liability
8,360
20,518
Long-term Financial Obligation
4,129,802
4,178,261
Long-term debt, less current portion, net of discounts
1,118,953
1,451,049
Total liabilities $
9,647,410
$
8,816,148
Stockholders' equity Common stock (26,429,955 and
25,762,342)
26,430
25,762
Additional paid-in-capital
41,149,551
40,619,620
Accumulated deficit
(37,596,492
)
(36,421,707
)
Total stockholders' equity $
3,579,489
$
4,223,675
Total liabilities and shareholders' equity $
13,226,899
$
13,039,823
Superior Drilling Products,
Inc.
Consolidated Statements of
Cash Flows
(unaudited)
September 30, 2021
September 30, 2020
Cash Flows From Operating Activities Net loss $
(1,174,785
)
$
(2,774,732
)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization expense
1,680,800
2,134,398
Share-based compensation expense
530,599
369,843
Gain on forgiveness of loan
-
(41,403
)
Loss (Gain) on sale or disposition of assets, net
1,187
(142,234
)
Impairment on asset held for sale
-
30,000
Amortization of deferred loan cost
13,893
13,894
Changes in operating assets and liabilities: Accounts receivable
(700,451
)
2,408,726
Inventories
(551,189
)
(942,831
)
Prepaid expenses and other noncurrent assets
(161,564
)
327,968
Accounts payable and accrued expenses
1,168,317
(100,876
)
Income Tax expense
71,376
82,148
Other noncurrent assets
-
(34,692
)
Other long-term liabilities
-
(61,421
)
Net Cash Provided By Operating Activities
878,183
1,268,788
Cash Flows From Investing Activities Purchases of
property, plant and equipment
(75,541
)
(154,475
)
Proceeds from sale of fixed assets
50,000
117,833
Net Cash Provided By Investing Activities
(25,541
)
(36,642
)
Cash Flows From Financing Activities Principal
payments on debt
(1,146,309
)
(2,167,539
)
Proceeds received from debt borrowings
-
964,120
Payments on Revolving Loan
(540,078
)
(1,018,690
)
Proceeds received from Revolving Loan
1,341,702
1,185,319
Net Cash Provided By (Used In) Financing Activities
(344,685
)
(1,036,790
)
Net change in Cash
507,957
195,356
Cash at Beginning of Period
1,961,441
1,217,014
Cash at End of Period $
2,469,398
$
1,412,370
Supplemental information: Cash paid for interest $
410,598
$
460,640
Inventory converted to property, plant and equipment $
513,558
$
922,993
Long term debt paid with Sale of Plane $
-
$
211,667
Assets in Progress (including freight and duty) $
589,099
$
-
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
($, in thousands)
Three Months Ended
September 30, 2021
September 30, 2020
June 30, 2021
GAAP net loss
$
(6,210
)
$
(1,731,272
)
$
(66,781
)
Add back: Depreciation and amortization
405,225
693,259
585,504
Interest expense, net
130,172
126,337
145,471
Share-based compensation
196,096
157,842
167,033
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
39,327
99,979
26,468
Loan Forgiveness
-
(41,403
)
-
(Gain) Loss on disposition of assets
-
-
11,187
Non-GAAP adjusted EBITDA(1)
$
852,810
$
(607,058
)
$
957,082
GAAP Revenue
$
3,561,919
$
1,547,442
$
3,399,109
Non-GAAP Adjusted EBITDA Margin
23.9
%
(39.2
)%
28.2
%
(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/20211112005299/en/
Investor Relations: Deborah K. Pawlowski, Kei Advisors
LLC (716) 843-3908, dpawlowski@keiadvisors.com
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