- Demonstrated innovation and expertise to outpace the oil &
gas industry recovery by adding new lines of business through
expanded relationships with current customers and also adding new
customers
- First quarter revenue rose $1.7 million to $4.1 million over
the prior-year period and was up 4.5% sequentially on strong demand
and as production capacity improved with staffing efficiencies
- Tool revenue grew 66% over the prior-year period and Contract
Services revenue was up 79%
- Achieved net income of $150 thousand and Adjusted EBITDA* of
$1.0 million or 24.5% as a percent of revenue
- Strengthened balance sheet: $2.9 million of cash and $6.5
million in shareholders’ equity at quarter-end
*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 first
quarter of 2022 ended March 31, 2022.
“Our team once again has demonstrated our ability to perform
exceptionally well. Over the last two years, we have delivered in
the face of adversity and now with markets accelerating are
expanding capacity, producing efficiently and meeting customer
demand. As a result, we had an excellent first quarter that
demonstrated the significant leverage inherent in our operations
with EBITDA margin expanding 360 basis points to 24.5% over the
trailing December quarter on just 4.5% increase in revenue,”
commented Troy Meier, Chairman and CEO. “A regularly growing number
of operators in North America are realizing the value of our
Drill-N-Ream® wellbore conditioning tool (“DNR”), demand is also
increasing for our quality manufacturing and refurbishment services
and our markets are consistently improving. We are encouraged with
the development of our new associates brought on last year that are
now producing at a higher rate, which has also allowed us to take
on more contract service work.”
He added, “Our commitment to training and efficiency remain a
priority as we make further investments in building out our team
with skilled experts. In addition, to support our growth
expectations, we recently invested $1.1 million in new machinery
that is expected to increase our capacity for both the manufacture
and refurbishment of drill bits as well as other contract
manufacturing work. We are excited about our future and believe
that we can continue to outperform as we advance through 2022 and
beyond.”
First Quarter 2022 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands)
March 31,2022 December
31,2021 March 31,2021
ChangeSequential
ChangeYear/Year North America
3,745
3,546
2,092
5.6%
79.0%
International
385
405
332
(4.9)%
15.9%
Total Revenue
$
4,130
$
3,950
$
2,425
4.5%
70.3%
Tool Sales/Rental
$
1,049
$
1,545
831
(32.1)%
26.2%
Other Related Tool Revenue
1,720
1,422
832
20.9%
106.6%
Tool Revenue
2,769
2,967
1,664
(6.7)%
66.4%
Contract Services
1,361
983
761
38.4%
78.9%
Total Revenue
$
4,130
$
3,950
$
2,425
4.5%
70.3%
Revenue growth reflects the continued recovery in the North
America oil & gas industry, strengthened market share for the
DNR and continued strong demand for the manufacture and
refurbishment of drill bits and other related tools.
For the first quarter of 2022, North America revenue comprised
approximately 90% of total revenue, with remaining sales all within
the Middle East. International markets, while showing improvement
year-over-year, remain under pressure as pandemic-related
restrictions persist and remain an obstacle to travel and labor
recruitment. Revenue in North America grew year-over-year from
increased tool revenue and strong growth in Contract Services.
First Quarter 2022 Operating Costs
($ in thousands, except per share amounts)
March 31,2022
December 31,2021 March 31,2021
ChangeSequential
ChangeYear/Year Cost of revenue
$
1,768
$
1,777
$
1,176
(0.5)%
50.4%
As a percent of sales
42.8%
45.0%
48.5%
Selling, general & administrative
$
1,647
$
1,660
$
1,516
(0.8)%
8.6%
As a percent of sales
39.9%
42.0%
62.5%
Depreciation & amortization
$
411
$
423
$
690
(2.8)%
(40.5)%
Total operating expenses
$
3,825
$
3,860
$
3,381
(0.9)%
13.1%
Operating Income (loss)
$
305
$
90
$
(957)
237.9%
NM
As a % of sales
7.4%
2.3%
(39.5)%
Other
(expense) income includingincome tax (expense)
$
(155)
$
555
$
(145)
(127.9)%
6.8%
Net Income (loss)
$
150
$
645
$
(1,102)
(76.8)%
(113.6)%
Diluted loss per share
$
0.01
$
0.02
$
(0.04)
(77.1)%
NM
Adjusted EBITDA(1)
$
1,014
$
827
$
(11)
22.6%
NM
As a % of sales
24.5%
20.9%
(0.4)%
(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 volume combined with cost discipline, improved processes
and operational efficiencies are resulting in enhanced leverage
despite continued investments in people and inflationary pressures.
Selling, general & administrative expenses were 39.9% of
revenue, a measurable improvement from the prior-year period, and
were 210 basis points lower sequentially.
Depreciation and amortization expense decreased approximately
40% year-over-year to $411 thousand as a result of fully amortizing
a portion of intangible assets and fully depreciating manufacturing
center equipment.
Net income for the quarter was $150 thousand, or $0.01 per
diluted share, up from a net loss of $1.1 million in the first
quarter of 2021. Net income for the sequential fourth quarter was
elevated due to the recovery of principal and interest of a related
party note receivable during the period.
Adjusted EBITDA increased to $1.0 million, or 24.5% of sales,
further demonstrating the strong inherent operating leverage in the
business. 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 $2.9 million, up slightly
from year-end 2021. Cash generated by operations for the quarter
was $1.1 million compared with $205 thousand in the year ago
period, largely reflecting the improvement in net income. Capital
expenditures were $919 thousand in the quarter and included a down
payment of $287 thousand to secure a new CNC machine.
Long-term debt, including the current portion, at quarter-end,
was $2.3 million, down 5% from December 31, 2021. The final $750
thousand of principal due on the Hard Rock note is payable on
October 5, 2022.
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, May 20, 2022. To
listen to the archived call, please call (412) 317-6671 and enter
conference ID number 13729000 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.
FINANCIAL TABLES FOLLOW.
Superior Drilling Products, Inc. Consolidated Condensed
Statements Of Operations (unaudited)
For the Three
Months Ended March 31,
2022
2021
Revenue North America
$ 3,745,014
$ 2,092,200
International
385,150
332,453
Total revenue
$ 4,130,164
$ 2,424,653
Operating cost and expenses Cost of revenue
1,767,903
1,175,593
Selling, general, and administrative expenses
1,646,643
1,515,590
Depreciation and amortization expense
410,733
690,074
Total operating costs and expenses
3,825,279
3,381,257
Operating Income (loss)
304,885
(956,604)
Other Income (expense) Interest income
197
48
Interest expense
(123,861)
(138,057)
Net gain/(loss) on sale or disposition of assets
-
10,000
Total other expense
(123,664)
(128,009)
Income (loss) before income taxes
$
181,221
$
(1,084,613)
Income tax expense
(31,384)
(17,180)
Net Income (loss)
$
149,837
$
(1,101,793)
Basic income (loss) per common share
$
0.01
$
(0.04)
Basic weighted average common shares outstanding
28,235,001
25,762,342
Diluted income (loss) per common Share
$
0.01
$
(0.04)
Diluted weighted average common shares outstanding
28,305,101
25,762,342
Superior Drilling Products, Inc. Consolidated Condensed
Balance Sheets March 31, 2022 December 31,
2021 (unaudited)
Assets Current assets: Cash
$
2,854,093
$
2,822,100
Accounts receivable, net
3,155,906
2,871,932
Prepaid expenses
248,502
435,595
Inventories
1,024,345
1,174,635
Other current assets
55,744
55,159
Total current assets
7,338,590
7,359,421
Property, plant and equipment, net
7,480,390
6,930,329
Intangible assets, net
194,444
236,111
Right of use Asset (net of amortization)
18,873
20,518
Other noncurrent assets
65,880
65,880
Total assets $
15,098,177
$
14,612,259
Liabilities and Owners' Equity Current liabilities:
Accounts payable $
1,245,122
$
1,139,091
Accrued expenses
609,991
467,462
Accrued Income tax
212,878
206,490
Current portion of Operating Lease Liability
11,561
13,716
Current portion of Long-term Financial Obligation
67,853
65,678
Current portion of long-term debt, net of discounts
2,116,480
2,195,759
Total current liabilities
4,263,885
4,088,196
Operating Lease Liability
7,312
6,802
Long-term Financial Obligation
4,093,686
4,112,658
Long-term debt, less current portion, net of discounts
225,396
256,675
Total liabilities
8,590,279
8,464,331
Shareholders' equity Common stock (28,235,001 and 25,762,342)
28,235
28,235
Additional paid-in-capital
43,281,334
43,071,201
Accumulated deficit
(36,801,671)
(36,951,508)
Total shareholders' equity
6,507,898
6,147,928
Total liabilities and shareholders'
equity $
15,098,177
$
14,612,259
Superior Drilling Products, Inc. Consolidated Condensed
Statement of Cash Flows For The Quarter Ended March 31, 2022
and 21 (Unaudited) March
31, 2022 March 31,
2021 Cash Flows From Operating Activities Net
Income (Loss)
$
149,837
$
(1,101,793)
Adjustments to reconcile net income to net cash used in
operating activities: Depreciation and amortization
expense
410,733
690,072
Share - based compensation expense
210,133
167,473
Loss / (Gain) on sale or disposition of assets
-
(10,000)
Amortization of deferred loan cost
4,631
4,631
Changes in operating assets and liabilities: Accounts
receivable
(283,974)
(256,215)
Inventories
150,290
23,925
Prepaid expenses and other noncurrent assets
186,508
(17,841)
Accounts payable and accrued expenses
248,560
688,451
Income Tax expense
6,388
16,380
Net Cash Provided By Operating Activities
1,083,106
205,083
Cash Flows From Investing Activities Purchases of
property, plant and equipment
(919,127)
(74,956)
Proceeds from sale of fixed assets
-
50,000
Net Cash Provided By (Used In) Investing Activities
(919,127)
(24,956)
Cash Flows From Financing Activities Principal
payments on debt
(131,978)
(135,403)
Payments on revolving loan
(21,541)
(280,245)
Proceeds received from revolving loan
21,533
536,331
Net Cash Used In Financing Activities
(131,986)
120,683
Net change in Cash
31,993
300,810
Cash at Beginning of Period
2,822,100
1,961,441
Cash at End of Period
$
2,854,093
$
2,262,251
Supplemental information: Cash paid for interest
$
122,157
$
130,363
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
($, in thousands)
Three Months Ended March 31,
2022 March 31, 2021
December 31,2021 GAAP net income (loss)
$
149,837
$
(1,101,793)
$
644,884
Add back: Depreciation and amortization
410,733
690,074
422,733
Interest expense, net
123,664
138,009
125,512
Share-based compensation
210,133
167,473
226,144
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
31,384
17,180
27,875
Recovery of Related Party Note Receivable
-
-
(707,112)
(Gain) Loss on disposition of assets
-
(10,000)
(939)
Non-GAAP adjusted EBITDA(1)
$
1,013,951
$
(10,858)
$
827,297
GAAP Revenue
$
4,130,164
$
2,424,653
$
3,950,469
Non-GAAP Adjusted EBITDA Margin
24.5%
(0.4)%
20.9%
(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/20220513005041/en/
For more information, contact investor relations: Deborah
K. Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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