- Third quarter revenue increased $1.6 million, or 45%, to $5.2
million over the prior-year period
- Tool revenue grew 43% and Contract Services revenue was up
51%
- Strong operating leverage resulted in net income of $639
thousand, or $0.02 per diluted share, compared with a loss in the
prior-year period
- Adjusted EBITDA* was $1.5 million with a margin of 29.5%, up
560 basis points
- Ended the quarter with $2.0 million in cash and $7.5 million in
shareholders’ equity
- Subsequent to quarter-end, the Company paid off remaining $750
thousand on the Hard Rock note
- 2022 outlook includes the anticipated sale of the initial phase
of the existing DNR tool fleet to support Middle East demand;
expecting revenue between $22 million to $24 million and Adjusted
EBITDA* of $6.5 million to $7.5 million. Without this sale,
expected 2022 revenue would be between $18 million and $20 million
and Adjusted EBITDA of $4.0 to $5.0 million.
*Adjusted EBITDA is a non-GAAP measure. See comments regarding
the use of non-GAAP measures and the reconciliation of the third
quarter 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 ended September 30, 2022.
“Our third quarter results were solid and near the high end
range of our expectations as our teams continued to execute well to
meet increasing demand for our tools and services,” commented Troy
Meier, Chairman and CEO. “Importantly, we have also
strengthened the earnings power of the company as we delivered net
income of $639 thousand and achieved Adjusted EBITDA of $1.5
million, the highest level in more than four years, which yielded
an impressive 29.5% margin.”
He added, “We believe that we continue to position ourselves
well for the demand that exists for our Drill-N-Ream® (“DNR”), both
domestically and internationally, and our contract services
work. We have enhanced our manufacturing team and processes,
and are expanding our capacity and improving our throughput with
investments in two new machining centers, one of which came online
during the third quarter. The second machining center is
expected to be operational during the first quarter of 2023.
On the international front, we continue to advance our efforts as
we have begun the process to setup a refurbishment facility in
Dubai and have bolstered our team with a new sales and marketing
lead that has made meaningful headway in Kuwait. We are also
looking forward to leveraging our new sales channel partner to
drive great exposure throughout the Middle East
region.”
Third Quarter 2022 Review ($ in thousands, except per
share amounts; See at “Definitions” the composition of
product/service revenue categories.)
September 30,2022 June 30,2022
September 30,2021 ChangeSequential
ChangeYear/Year North America
4,623
4,021
3,041
15.0
%
52.0
%
International
550
520
521
5.8
%
5.6
%
Total Revenue
$
5,173
$
4,541
$
3,562
13.9
%
45.2
%
Tool (DNR) Revenue
3,343
2,892
2,346
15.6
%
42.5
%
Contract Services
1,829
1,649
1,216
10.9
%
50.5
%
Total Revenue
$
5,173
$
4,541
$
3,562
13.9
%
45.2
%
Revenue growth reflects the continued recovery in the North
America oil & gas industry and improving market conditions in
the Middle East. Also contributing was strong demand for the
manufacture and refurbishment of drill bits and other related tools
for the Company’s long-time legacy customer.
For the third quarter of 2022, North America revenue comprised
approximately 89% of total revenue, with remaining revenue all
within the Middle East. Revenue in North America grew 52%
year-over-year from increased Tool Revenue and strong growth in
Contract Services.
Third Quarter 2022 Operating Costs ($ in thousands,
except per share amounts)
September 30, June 30, September 30,
Change Change
2022
2022
2021
Sequential Year/Year Cost of revenue
$
2,231
$
2,116
$
1,442
5.4
%
54.7
%
As a percent of sales
43.1
%
46.6
%
40.5
%
Selling, general, & administrative
$
1,723
$
1,894
$
1,551
-9.0
%
11.1
%
As a percent of sales
33.3
%
41.7
%
43.6
%
Depreciation & amortization
$
363
$
403
$
405
-10.0
%
-10.5
%
Total operating expenses
$
4,316
$
4,413
$
3,399
-2.2
%
27.0
%
Operating income
$
856
$
128
$
163
568.8
%
424.0
%
As a percent of sales
16.6
%
2.8
%
4.6
%
Other (expense) income including
income tax expense
$
(217
)
$
(184
)
$
(169
)
18.0
%
28.1
%
Net income (loss)
$
639
$
(57
)
$
(6
)
NM
NM
Diluted income (loss) per share
0.02
(0.00
)
(0.00
)
Adjusted EBITDA(1)
$
1,525
$
831
$
853
83.5
%
78.8
%
As a percent of sales
29.5
%
18.3
%
23.9
%
(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 income (loss)
to Adjusted EBITDA.
The year-over-year increase in the cost of revenue as a percent
of revenue was the result of global inflationary headwinds and an
expansion of the Company’s workforce to accommodate for its current
and expected demand.
Selling, general & administrative expenses were 33.3% of
revenue, a significant improvement from the prior-year period due
to the leverage on higher sales volume.
Depreciation and amortization expense decreased 10.5%
year-over-year to $363 thousand due to 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 $2.0 million. Cash
generated by operations for the year-to-date period was $1.3
million compared with $1.4 million in the prior-year period.
Higher net income was offset by working capital timing and an
increase in inventory to combat supply chain inefficiencies and in
support of the Company’s growth. Year-to-date capital
expenditures of $2.6 million were related to machining capacity
expansion, higher maintenance activities, and an increase in the
Company’s Middle East DNR rental tool fleet. The comparable
period in 2021 had $589 thousand of capital spending. The
Company refined its capital spending expectations for fiscal 2022
to range between $3.5 million to $4.0 million.
Total debt was $3.0 million at September 30, 2022.
Subsequent to quarter-end, in October, the Company made the final
$750 thousand principal payment on its Hard Rock Note.
2022 Guidance
The full year 2022 expectations reflect the projected impact
from the sale of the $3.8 million stage one Middle East DNR fleet
to Bin Zayed Petroleum in the fourth quarter of 2022.
Revenue: $22 million to $24
million SG&A: $7.0 million to $7.3 million
Adjusted EBITDA(1): $6.5 million to $7.5 million
Without the $3.8 million DNR fleet sale, expected 2022 revenue
would be between $18 million and $20 million and Adjusted EBITDA of
$4.0 to $5.0 million.
(1) See “Forward Looking Non-GAAP Financial Measures” below for
additional information about this non-GAAP measure.
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 pm MT (3:00 pm ET) the day of the teleconference until
Friday, November 18, 2022. To listen to the archived call,
please call (412) 317-6671 and enter conference ID number 13733329
or access the webcast replay at www.sdpi.com, where a transcript
will be posted once available.
Definitions and Composition of Product/Service
Revenue:
Tool (DNR) Revenue is the sum of tool sales/rental revenue and
other related tool revenue, which is comprised of royalties and
fleet maintenance fees.
Contract Services revenue is comprised of repair and
manufacturing services for drill bits and other tools or products
for customers.
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 Nine Months Ended September 30,
Ended September 30,
2022
2021
2022
2021
Revenue North America
$
4,622,614
$
3,040,689
$
12,388,747
$
9,527,395
International
549,931
521,229
1,454,805
1,384,103
Total revenue
$
5,172,545
$
3,561,918
$
13,843,552
$
10,911,498
Operating cost and expenses Cost of revenue
2,230,706
1,441,943
6,114,705
3,841,713
Selling, general, and administrative expenses
1,723,221
1,551,462
5,264,270
4,540,134
Depreciation and amortization expense
362,773
405,225
1,176,151
1,680,804
Total operating costs and expenses
4,316,700
3,398,630
12,555,126
10,062,651
Operating Income (Loss)
855,845
163,289
1,288,426
(676,971
)
Other income (expense) Interest income
10,544
49
13,720
147
Interest expense
(154,108
)
(130,221
)
(410,707
)
(413,798
)
Gain (Loss) on disposition of assets, net
(29,381
)
-
(51,527
)
(1,187
)
Total other expense
(172,945
)
(130,172
)
(448,514
)
(414,838
)
Income (loss) before income taxes
682,900
33,117
839,912
(1,091,809
)
Income tax expense
(44,169
)
(39,327
)
(107,852
)
(82,976
)
Net income (loss)
$
638,731
$
(6,210
)
$
732,060
$
(1,174,785
)
Basic income (loss) per common share
$
0.02
$
(0.00
)
$
0.03
$
(0.05
)
Basic weighted average common shares outstanding
28,845,456
26,154,202
28,440,722
25,894,397
.
Diluted income (loss) per common Share
$
0.02
$
(0.00
)
$
0.03
$
(0.05
)
Diluted weighted average common shares outstanding
28,855,456
26,154,202
28,450,722
25,894,397
Superior Drilling Products, Inc. Consolidated Condensed
Balance Sheets September 30, 2022 December 31,
2021 (unaudited)
Assets Current assets: Cash
$
2,046,754
$
2,822,100
Accounts receivable, net
4,083,645
2,871,932
Prepaid expenses
564,176
435,595
Inventories
1,623,051
1,174,635
Other current assets
774,799
55,159
Total current assets
9,092,425
7,359,421
Property, plant and equipment, net
8,427,003
6,930,329
Intangible assets, net
111,111
236,111
Right of use Asset (net of amortizaton)
688,673
20,518
Other noncurrent assets
111,519
65,880
Total assets $
18,430,731
$
14,612,259
Liabilities and Owners' Equity Current liabilities:
Accounts payable $
1,264,952
$
1,139,091
Accrued expenses
883,572
467,462
Accrued Income tax
264,081
206,490
Current portion of Operating Lease Liability
202,350
13,716
Current portion of Long-term Financial Obligation
72,344
65,678
Current portion of long-term debt, net of discounts
2,319,727
2,195,759
Current portion of Deferred Income
63,281
-
Total current liabilities
5,070,307
4,088,196
Operating Lease Liability
486,323
6,802
Long-term Financial Obligation
4,057,537
4,112,658
Long-term debt, less current portion, net of discounts
684,038
256,675
Deferred Income
611,719
Total liabilities
10,909,924
8,464,331
Shareholders' equity Common stock (28,235,001 and
25,762,342)
29,245
28,235
Additional paid-in-capital
43,711,009
43,071,201
Accumulated deficit
(36,219,447
)
(36,951,508
)
Total shareholders' equity
7,520,807
6,147,928
Total liabilities and shareholders'
equity $
18,430,731
$
14,612,259
Superior Drilling Products, Inc. Consolidated Condensed
Statement of Cash Flows (Unaudited)
For the Nine
Months Ended September 30,
2022
2021
Cash Flows From Operating Activities Net Income
(Loss) $
732,060
$
(1,174,785
)
Adjustments to reconcile net income to net cash used in
operating activities: Depreciation and amortization
expense
1,176,151
1,680,804
Stock-based compensation expense
640,816
530,595
Loss on disposition of rental fleet
23,012
-
Loss / (Gain) on sale or dispositon of assets
28,515
1,187
Amortization of deferred loan cost
13,893
13,893
Changes in operating assets and liabilities:
Accounts receivable
(1,211,713
)
(700,451
)
Inventories
(446,866
)
(37,631
)
Prepaid expenses and other current and noncurrent
assets
(893,860
)
(161,564
)
Accounts payable and accrued expenses
1,216,974
1,168,317
Income Tax expense
57,591
71,376
Net Cash Provided By Operating Activities
1,336,573
1,391,741
Cash Flows From Investing Activities Purchases
of propety, plant and equipment
(2,600,902
)
(589,099
)
Proceeds from sale of fixed assets
-
50,000
Net Cash Provided By (Used In) Investing Activities
(2,600,902
)
(539,099
)
Cash Flows From Financing Activities Principal
payments on debt
(508,146
)
(1,146,309
)
Proceeds received from debt borrowings
997,134
-
Payments on revolving loan
(633,440
)
(540,078
)
Proceeds received from revolving loan
633,435
1,341,702
Net Cash Used In Financing Activities
488,983
(344,685
)
Net change in Cash
(775,346
)
507,957
Cash at Beginning of Period
2,822,100
1,961,441
Cash at End of Period $
2,046,754
$
2,469,398
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
Three Months Ended September 30, 2022 September
30, 2021 June 30, 2022 GAAP net income (loss)
$
638,731
$
(6,210
)
$
(56,510
)
Add back Depreciation and amortization
362,773
405,225
402,648
Interest expense, net
143,564
130,172
129,760
Share-based compensation
218,217
196,096
212,469
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
44,169
39,327
32,299
(Gain) Loss on disposition of assets
29,381
-
22,146
Non-GAAP adjusted EBITDA(1)
$
1,525,035
$
852,810
$
831,012
GAAP Revenue
$
5,172,545
$
3,561,919
$
4,540,842
Non-GAAP Adjusted EBITDA Margin
29.5
%
23.9
%
18.3
%
(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/20221111005151/en/
For more information, contact investor relations: Deborah
K. Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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