- Fourth quarter revenue grew to $4.0 million, up over 2.5
times over the prior-year period and up 11% sequentially
- Revenue for 2021 increased 27% to $13.3 million driven by
strong demand for SDP’s flagship Drill-N-Ream® wellbore
conditioning tool and the significant recovery in oil & gas
production in North America
- Achieved net income of $645 thousand for the quarter and
Adjusted EBITDA* of $827 thousand, or 20.9% as a percent of
revenue
- Ended year with $6.1 million in shareholders’ equity
*Adjusted EBITDA is a non-GAAP measure. See comments regarding
the use of non-GAAP measures and the reconciliation of GAAP to
non-GAAP measures in the tables of this release
Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or
the “Company”), a designer and manufacturer of drilling tool
technologies, today reported financial results for the fourth
quarter of 2021 ended December 31, 2021.
Troy Meier, Chairman and CEO, commented, “We had exceptional
growth in demand for our Drill-N-Ream® wellbore conditioning tool
(“DNR”) as the number of operators and rigs using the tool
continues to grow. It would appear as well that we are now reaching
a point where tool fleet replacement is required as tool sales in
the quarter picked up measurably.”
He added, “We have been building out our team and focused on
training to be able to deliver to demand in 2022. We are working
hard to address the challenges of talent management and retention,
stay ahead of supply chain constraints and meet our customers’
requirements as demand continues to expand.”
Fourth Quarter 2021 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands)
December 31,2021 September 30,2021
December 31,2020 ChangeSequential
ChangeYear/Year North America
3,546
3,041
1,203
16.6%
194.7%
International
405
521
338
(22.3)%
19.7%
Total Revenue
$
3,950
$
3,562
$
1,541
10.9%
156.3%
Tool Sales/Rental
$
1,545
$
836
342
84.8%
351.7%
Other Related Tool Revenue
1,422
1,510
561
(5.8)%
153.4%
Tool Revenue
2,967
2,346
903
26.5%
228.5%
Contract Services
983
1,216
638
(19.1)%
54.1%
Total Revenue
$
3,950
$
3,562
$
1,541
10.9%
156.3%
Significant growth in revenue year-over-year reflected a strong
recovery in the oil & gas industry especially in North America,
growing market penetration of the Company’s DNR in North America
and the related expanded demand for new drilling tools.
For the fourth quarter 2021, approximately 90% of revenue was
from North America and approximately 10% from international
markets, all within the Middle East. Revenue in North America grew
year-over-year from increased tool revenue and strong growth in
Contract Services.
Fourth Quarter 2021 Operating Costs
($ in thousands, except per share amounts)
December 31,2021
September 30,2021 December 31,2020
ChangeSequential ChangeYear/Year Cost of revenue
$
1,777
$
1,442
$
821
23.2%
116.5%
As a percent of sales
45.0%
40.5%
53.3%
Selling, general & administrative
$
1,660
$
1,551
$
1,483
7.0%
11.9%
As a percent of sales
42.0%
43.6%
96.2%
Depreciation & amortization
$
423
$
405
$
682
4.3%
(38.0)%
Total operating expenses
$
3,860
$
3,399
$
2,986
13.6%
29.3%
Operating Income (loss)
$
90
$
163
$
(1,445)
(44.7)%
(106.2)%
As a % of sales
2%
4.6%
(94)%
Other (expense) income includingincome tax (expense)
$
555
$
(169)
$
790
(427.2)%
(29.8)%
Net Income (loss)
$
645
$
(6)
$
(655)
NM
NM
Diluted loss per share
$
0.02
$
(0.00)
$
(0.03)
Adjusted EBITDA(1)
$
827
$
853
$
(494)
(3.0)%
(267.4)%
As a % of sales
20.9%
23.9%
NM
(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.
Gross margin was impacted by operating inefficiencies associated
with labor shortages and supply chain constraints. Selling, general
& administrative expenses were higher as a result of labor
constraints and the inflationary impact of wages.
Net income of $645 thousand, or $0.02 per diluted share was
primarily due to the recovery of principal and interest of a
related party note receivable in the fourth quarter. Adjusted
EBITDA(1) improved year-over-year to $827 thousand on higher net
income.
The Company believes that when used in conjunction with measures
prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”), Adjusted EBITDA, which is a non-GAAP measure,
helps in the understanding of its operating performance.
Full Year 2021 Review
($ in thousands, except per share amounts)
December
31,2021 December 31,2020 $ Change % Change
Tool sales/rental
$
4,331
$
3,030
$
1,301
42.9%
Other Related Tool Revenue
4,917
4,021
$
896
22.3%
Tool Revenue
$
9,248
$
7,051
$
2,198
31.2%
Contract Services
4,088
3,420
$
667
19.5%
Total Revenue
$
13,336
$
10,471
$
2,865
27.4%
Operating expenses
13,923
14,293
$
(371)
(2.6)%
Operating (loss) income
$
(587)
$
(3,823)
$
3,235
(84.6)%
Net loss
$
(530)
$
(3,430)
$
2,900
(84.6)%
Diluted loss per share
$
(0.02)
$
(0.13)
$
0.11
Adjusted EBITDA(1)
$
2,626
$
(103)
$
2,729
NM
Revenue of $13.3 million grew 27% over the prior year as a
result of an improved market combined with strong demand for the
Company’s products and services. Revenue in North America was up
35% which more than offset a 8.7% decline in international markets
as the Middle East continued to address the global pandemic with
containment restrictions.
Tool revenue was $9.2 million, up 31%, or $2.2 million, from the
prior-year period driven by demand for the DNR, both new tools as
well as repair and royalty revenue from DNR activity on more rigs
throughout the year. Contract Services revenue increased
approximately $667 thousand, or 19%, to $4.1 million for the year
as the Company refurbished more tools for its legacy customer.
Operating expenses in 2021 were down $371 thousand, or 3%,
compared with 2020. This was primarily as a result of lower
amortization expense and the reorganization of the Company’s
international business to improve profitability.
Other income in 2021 included $707 thousand for recovery of a
related party note receivable, whereas 2020 benefitted from the
$933 thousand in forgiveness on SBA loans.
The net loss in 2021 was $530 thousand, or ($0.02) per diluted
share, improved over a net loss of $3.4 million, ($0.13) per
diluted share in 2020.
Adjusted EBTIDA was $2.6 million in 2021, or 19.7% of revenue.
This was up from an Adjusted loss before tax, interest,
depreciation and amortization of $103 thousand in 2020.
Balance Sheet and Liquidity
Cash at the end of the quarter was $2.8 million, up $861
thousand from the end of 2020 and up $353 thousand from the
trailing third quarter. Cash generated by operations for the year
was $526 thousand. Long-term debt, including the current portion,
at quarter-end was $2.5 million. The final $750 thousand of
principal due on the note is payable on October 5, 2022.
During the quarter, the Company completed an equity offering of
1,739,131 shares of common stock at a price of $1.15 per share,
which resulted in net proceeds of approximately $1.7 million.
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, March 18, 2022. To
listen to the archived call, please call (412) 317-6671 and enter
conference ID number 13727112 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® 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.
FINANCIAL TABLES FOLLOW.
Superior Drilling Products, Inc. Consolidated Condensed
Statements Of Operations (unaudited)
For the Three Months
For the Twelve Months
Ended December 31,
Ended December 31,
2021
2020
2021
2020
Revenue North America
$
3,545,648
$
1,203,086
$
11,619,593
$
8,590,933
International
404,821
338,119
1,716,556
1,879,865
Total revenue
$
3,950,469
$
1,541,205
$
13,336,149
$
10,470,798
Operating cost and expenses Cost of revenue
1,777,130
820,961
5,618,844
5,105,677
Selling, general, and administrative expenses
1,660,386
1,483,338
6,200,522
6,371,337
Depreciation and amortization expense
422,733
681,998
2,103,534
2,816,396
Total operating costs and expenses
3,860,249
2,986,297
13,922,900
14,293,410
Operating Income (loss)
90,220
(1,445,092)
(586,751)
(3,822,612)
Other Income (expense) Interest income
81
28
228
5,803
Interest expense
(125,593)
(125,096)
(539,390)
(575,306)
Recovery of related party note receivable
707,112
-
707,112
-
Loss on Fixed Asset Impairment
-
-
-
(30,000)
Net gain/(loss) on sale or disposition of assets
939
32,000
(249)
174,234
Loan Forgiveness
-
891,600
-
933,003
Total other expense
582,539
798,532
167,701
507,734
Income (loss) before income taxes
$
672,759
$
(646,560)
$
(419,050)
$
(3,314,878)
Income tax expense
(27,875)
(8,582)
(110,751)
(114,996)
Net Income (loss)
$
644,884
$
(655,142)
(529,801)
(3,429,874)
Basic income (loss) per common share
$
0.02
$
(0.03)
$
(0.02)
$
(0.13)
Basic weighted average common shares outstanding
27,816,874
25,650,846
26,378,967
25,515,166
Diluted income (loss) per common Share
$
0.02
$
(0.03)
$
(0.02)
$
(0.13)
Diluted weighted average common shares outstanding
26,153,334
25,650,846
26,378,967
25,515,166
Superior Drilling Products,
Inc.
Consolidated Condensed Balance
Sheets
December 31, 2021 December 31, 2020
(unaudited)
Assets Current assets: Cash $
2,822,100
$
1,961,441
Accounts receivable, net
2,871,932
1,345,622
Prepaid expenses
435,595
90,269
Inventories
1,174,635
1,020,008
Asset held for sale
-
40,000
Other current assets
55,159
40,620
Total current assets
7,359,421
4,497,960
Property, plant and equipment, net
6,930,329
7,535,098
Intangible assets, net
236,111
819,444
Right of use Asset (net of amortization) $
20,518
$
99,831
Other noncurrent assets
65,880
87,490
Total assets $
14,612,259
$
13,039,823
Liabilities and Owners' Equity Current liabilities:
Accounts payable $
1,139,091
$
430,015
Accrued expenses
467,462
1,091,518
Accrued Income tax
206,490
106,446
Current portion of Operating Lease Liability
13,716
79,313
Current portion of Long-term Financial Obligation
65,678
61,691
Current portion of long-term debt, net of discounts
2,195,759
1,397,337
-
-
Total current liabilities $
4,088,196
$
3,166,320
Operating long term liability
6,802
20,518
Long-term Financial Obligation
4,112,658
4,178,261
Long-term debt, less current portion, net of discounts
256,675
1,451,049
Total liabilities $
8,464,331
$
8,816,148
Shareholders' equity Common stock (28,218,316 and
25,762,342)
28,218
25,762
Additional paid-in-capital
43,071,218
40,619,620
Accumulated deficit
(36,951,508)
(36,421,707)
Total stockholders' equity $
6,147,928
$
4,223,675
Total liabilities and shareholders' equity $
14,612,259
$
13,039,823
Superior Drilling Products, Inc. Consolidated Statement
of Cash Flows (Unaudited)
December 31,2021
December 31,2020 Cash Flows From Operating Activities
Net Loss $
(529,801)
$
(3,429,874)
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization expense
2,103,534
2,816,396
Amortization debt discount
Share - based compensation expense
756,743
550,573
Loss on disposition of rental fleet
-
23,649
Loss (Gain) on sale or dispositon of assets
249
(174,234)
Gain on Forgiveness of loan
-
(933,003)
Impairment on asset held for sale
-
30,000
Amortization of deferred loan cost
18,522
18,525
Changes in operating assets and liabilities:
Accounts receivable
(1,526,310)
2,504,887
Inventories
(143,590)
(95,976)
Prepaid expenses and other noncurrent assets
(338,255)
266,488
Accounts payable and accrued expenses
85,020
(85,630)
Income Tax expense
100,044
90,566
Other long term liabilities
-
(61,421)
Net Cash Provided By Operating Activities
526,156
1,520,946
Cash Flows From Investing Activities
Purchases of property, plant and equipment
(936,718)
(1,167,346)
Proceeds from sale of fixed assets
50,000
149,833
Net Cash Provided By Investing Activities
(886,718)
(1,017,513)
Cash Flows From Financing Activities
Principal payments on debt
(1,277,730)
(2,350,783)
Proceeds received from debt borrowings
-
72,520
Proceeds received from SBA Paycheck Protection Program (PPP)
-
891,600
Payments on Revolving loan
(895,787)
(1,179,768)
Proceeds received from Revolving loan
1,697,427
1,185,319
Proceeds from financing obligation
-
1,622,106
Proceeds from Issuance of Common Stock
1,697,311
-
Net Cash Provided By (Used In) Financing Activities
1,221,221
240,994
Net change in Cash
860,659
744,427
Cash at Beginning of Period
1,961,441
1,217,014
Cash at End of Period $
2,822,100
$
1,961,441
Supplemental information:
Cash paid for interest $
530,898
$
576,854
Non-cash payment of other liabilities by offsetting recovery
ofrelated-party note receivable $
707,112
$
-
Long term debt paid with Sale of Plane $
-
$
211,667
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
($, in thousands)
Three Months Ended December
31,2021 December 31,2020 September 30,2021
GAAP net income (loss)
$
644,884
$
(655,142)
$
$
(6,210)
Add back: Depreciation and amortization
422,733
681,998
405,225
Interest expense, net
125,512
125,068
130,172
Share-based compensation
226,144
180,730
196,096
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
27,875
8,582
39,327
Recovery of Related Party Note Receivable
(707,112)
-
-
Loan Forgiveness
-
(891,600)
-
(Gain) Loss on disposition of assets
(939)
(32,000)
-
Non-GAAP adjusted EBITDA(1)
$
827,297
$
(494,164)
$
852,810
GAAP Revenue
$
3,950,469
$
1,541,205
$
3,561,919
Non-GAAP Adjusted EBITDA Margin
20.9%
NM
23.9%
Year Ended December 31,2021 December
31,2020 GAAP net loss
$
(529,801)
$
(3,429,874)
Add back: Depreciation and amortization
2,103,534
2,816,396
Interest expense, net
539,162
569,503
Share-based compensation
756,743
550,573
Net non-cash compensation
352,800
352,800
Income tax expense
110,751
114,996
Impairment on asset held for sale
-
30,000
Gain on disposition of assets
(249)
(174,234)
Loan forgiveness
-
(933,003)
Inventory impairment
-
-
Recovery of related party note receivable
(707,112)
-
Non-GAAP adjusted EBITDA(1)
$
2,625,828
$
(102,843)
GAAP Revenue
$
13,336,149
$
10,470,798
Non-GAAP Adjusted EBITDA Margin
19.7%
(1.0)%
(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/20220311005130/en/
For more information, contact investor relations: Deborah
K. Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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