- Second quarter revenue grew to $3.4 million, up $1.0 million
over the trailing first quarter and up $1.4 million over prior-year
period
- Rig efficiencies drive higher levels of drilling activity with
more wells and greater footage even as rig count stabilizes
- Gaining global market share with presence on more rigs; North
America revenue was up 74% and International revenue increased 37%
over prior-year period
- Cost savings efforts and higher volume drove positive cash
generation from operations; ended quarter with $2.7 million of cash
on hand
- Achieved break-even earnings per diluted share with net loss of
$67 thousand; Adjusted EBITDA* was $1.0 million, or 28.2% as a
percent of revenue
*Adjusted EBITDA is a non-GAAP measure. See comments regarding
the use of non-GAAP measures and the reconciliation of GAAP to
non-GAAP measures in the tables of this release
Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or
the “Company”), a designer and manufacturer of drilling tool
technologies, today reported financial results for the second
quarter of 2021 ended June 30, 2021.
Troy Meier, Chairman and CEO, commented, “We believe our strong
growth this quarter clearly demonstrated the value of our
Drill-N-Ream® (“DNR”) well bore conditioning tool as well as the
growing demand for our manufacturing capabilities. The DNR is
enabling drilling innovation. We believe that by including our tool
in their drill string, producers are able to drill more complex
well profiles and increase the total flow area of their wells while
covering greater footage in shorter amounts of time. Additionally,
we are expanding the volume and products we manufacture for our
long-time legacy customer to support their efforts to provide
quality products while advancing their technologies.”
He continued, “While we are not yet back to pre-pandemic levels,
we continue to gain market share as markets recover. We expect that
we will continue to grow through 2021 and be back on track in 2022
to resume the growth plans we had expected at the end of 2019.”
Second Quarter 2021 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands, except per share amounts)
June 30,2021
March 31,2021 June 30,2020
ChangeSequential
ChangeYear/Year North America
2,941
2,092
1,689
40.6
%
74.1
%
International
458
332
335
37.8
%
36.5
%
Total Revenue
$
3,399
$
2,425
$
2,024
40.2
%
67.9
%
Tool Sales/Rental
$
1,120
$
831
371
34.7
%
202.1
%
Other Related Tool Revenue
1,153
832
973
38.5
%
18.5
%
Tool Revenue
2,273
1,664
1,343
36.6
%
69.2
%
Contract Services
1,126
761
681
48.0
%
65.4
%
Total Revenue
$
3,399
$
2,425
$
2,024
40.2
%
67.9
%
Revenue increased sequentially $974 thousand, or 40%, over the
trailing first quarter as market share and market conditions
improved. Improvements, year-over-year and sequentially, represent
improved demand as oil and gas production markets improve and as
the Company gains greater market presence. Revenue in North America
increased 74%, year-over-year, from increased tool sales, as well
as higher royalty and repair fees. International revenue grew 37%
over the prior-year period as recognition of the DNR’s value by oil
field service companies is growing and the Company also gained a
new International customer. Contract Services revenue also improved
65%, reflecting increased drill bit refurbishment. Sequentially,
North America and International revenue increased on greater market
penetration and improving market conditions.
Second Quarter 2021 Operating Costs
($ in thousands, except per share amounts)
June 30,2021
March 31,2021 June 30,2020
ChangeSequential
ChangeYear/Year Cost of revenue
$
1,224
$
1,176
$
1,100
4.1
%
11.3
%
As a percent of sales
36.0
%
48.5
%
54.3
%
Selling, general &
administrative
$
1,473
$
1,516
$
1,340
(2.8
)%
9.9
%
As a percent of sales
43.3
%
62.5
%
66.2
%
Depreciation &
amortization
$
586
$
690
$
680
(15.2
)%
(13.9
)%
Total operating expenses
$
3,283
$
3,381
$
3,120
(2.9
)%
5.2
%
Operating Income (loss)
$
116
$
(957
)
$
(1,096
)
NM
NM
As a % of sales
3.4
%
(39.5
)%
(54.1
)%
Other (expense) income includingincome
tax (expense)
$
(183
)
$
(145
)
$
(146
)
NM
NM
Net income (loss)
$
(67
)
$
(1,102
)
$
(1,242
)
NM
NM
Diluted earnings (loss) per share
$
(0.00
)
$
(0.04
)
$
(0.05
)
NM
NM
Adjusted EBITDA(1)
$
957
$
(11
)
$
(222
)
NM
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.
Higher revenue and lower operating expenses resulted in
operating income of $116 thousand. Total operating expenses
decreased 3% over the trailing first quarter, as a result of timing
of expenses related to year end close and the reduction in
amortization expense.
Net loss for the quarter was practically breakeven at $67
thousand compared with net loss of $1.1 million in the trailing
first quarter. Measurably improved operating income more than
offset other expenses which included a $11 thousand loss on the
disposal of assets. Compared with the trailing first quarter,
Adjusted EBITDA(1) improved measurably to $1.0 million as a result
of increased sales and operating leverage gained from higher
volume, while Adjusted EBITDA margin expanded to 28.2%.
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 $2.7 million, up from $2.0
million at the end of 2020. Cash provided by operations in the six
months ended June 30, 2021 was $400 thousand. Long-term debt,
including the current portion at June 30, 2021, was $3.2 million.
Subsequent to the end of the quarter, the Company paid the next
$750 thousand principal payment due on the Hard Rock note. The
remaining $750 thousand of principal due on the note is payable on
October 5, 2022.
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 full year 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 20, 2021. To
listen to the archived call, please call (412) 317-6671 and enter
conference ID number 13721241, 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 Six Months Ended June 30,
Ended June 30,
2021
2020
2021
2020
Revenue North America
$
2,941,056
$
1,688,933
$
5,033,255
$
6,269,443
International
458,053
335,455
790,506
1,112,708
Total revenue
$
3,399,109
$
2,024,388
$
5,823,761
$
7,382,151
Operating cost and expenses Cost of revenue
1,224,179
1,099,553
2,399,772
3,414,061
Selling, general, and administrative expenses
1,473,081
1,340,213
2,988,670
3,358,112
Depreciation and amortization expense
585,504
680,375
1,275,577
1,441,139
Total operating costs and expenses
3,282,764
3,120,141
6,664,019
8,213,312
Operating Income (loss)
116,345
(1,095,753
)
(840,258
)
(831,161
)
Other income (expense) Interest income
50
942
98
5,630
Interest expense
(145,521
)
(146,470
)
(283,577
)
(323,728
)
Loss on Fixed Asset Impairment
-
-
-
(30,000
)
Net gain/(loss) on sale or disposition of assets
(11,187
)
-
(1,187
)
142,234
Total other expense
(156,658
)
(145,528
)
(284,666
)
(205,864
)
Loss before income taxes
$
(40,313
)
$
(1,241,281
)
$
(1,124,924
)
$
(1,037,025
)
Income tax expense
(26,468
)
(225
)
(43,649
)
(6,435
)
Net loss
$
(66,781
)
$
(1,241,506
)
$
(1,168,573
)
$
(1,043,460
)
Basic loss per common share
$
(0.00
)
$
(0.05
)
$
(0.05
)
$
(0.04
)
Basic weighted average common shares outstanding
25,762,342
25,434,593
25,762,342
25,462,360
Diluted loss per common Share
$
(0.00
)
$
(0.05
)
$
(0.05
)
$
(0.04
)
Diluted weighted average common shares outstanding
25,762,342
25,434,593
25,762,342
25,426,360
Superior Drilling Products, Inc. Consolidated Condensed
Balance Sheets
June 30, 2021
December 31, 2020 (unaudited)
Assets
Current assets:
Cash $
2,689,113
$
1,961,441
Accounts receivable, net
1,930,402
1,345,622
Prepaid expenses
392,138
90,269
Inventories
1,060,233
1,020,008
Asset held for sale
-
40,000
Other current assets
42,751
40,620
Total current assets
6,114,637
4,497,960
Property, plant and equipment, net
6,814,895
7,535,098
Intangible assets, net
319,444
819,444
Right of use Asset (net of amortizaton)
$
47,747
$
99,831
Other noncurrent assets
64,304
87,490
Total assets $
13,361,027
$
13,039,823
Liabilities and Owners' Equity
Current liabilities:
Accounts payable $
597,643
$
430,014
Accrued expenses
1,801,476
1,091,519
Accrued Income tax
138,595
106,446
Current portion of Operating Lease Liability
29,803
79,313
Current portion of Long-term Financial
Obligation
61,504
61,691
Current portion of long-term debt, net of
discounts
1,948,191
1,397,337
Total current liabilities $
4,577,212
$
3,166,320
Operating long term liability
17,944
20,518
Long-term Financial Obligation
4,145,726
4,178,261
Long-term debt, less current portion, net of discounts
1,230,539
1,451,049
Total liabilities
$
9,971,421
$
8,816,148
Stockholders' equity
Common stock (25,762,342 and 25,762,342)
25,762
25,762
Additional paid-in-capital
40,954,125
40,619,620
Accumulated deficit
(37,590,281)
(36,421,707)
Total stockholders' equity $
3,389,606
$
4,223,675
Total liabilities and shareholders'
equity $
13,361,027
$
13,039,823
Consolidated Condensed Statement of Cash Flows
(Unaudited) June 30, 2021
June 30, 2020 Cash Flows From
Operating Activities Net loss $
(1,168,573)
$
(1,043,460)
Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation and amortization
expense
1,275,575
1,441,139
Share-based compensation expense
334,505
212,001
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
9,262
9,263
Changes in operating assets and liabilities:
Accounts receivable
(584,780)
2,435,735
Inventories
(95,846)
(860,431)
Prepaid expenses and other noncurrent assets
(280,814)
314,868
Accounts payable and accrued expenses
877,585
(230,959)
Income Tax expense
32,149
6,335
Other long-term liabilities
-
(61,421)
Net Cash Provided By Operating Activities
400,250
2,110,836
Cash Flows From Investing Activities Purchases
of property, plant and equipment
(10,940)
(90,132)
Proceeds from sale of fixed assets
50,000
117,833
Net Cash Provided By Investing Activities
39,060
27,701
Cash Flows From Financing Activities Principal
payments on debt
(266,719)
(1,953,673)
Proceeds received from debt borrowings
-
964,120
Payments on Revolving Loan
(513,897)
(842,880)
Proceeds received from Revolving Loan
1,068,978
1,009,822
Net Cash Provided By (Used In) Financing Activities
288,362
(822,611)
Net change in Cash
727,672
1,315,926
Cash at Beginning of Period
1,961,441
1,217,014
Cash at End of Period $
2,689,113
$
2,532,940
Supplemental information: Cash paid for interest
$
270,492
$
340,027
Inventory converted to property, plant and equipment $
65,720
$
482,282
Long term debt paid with Sale of Plane $
-
$
211,667
($, in thousands)
Three Months Ended June 30, 2021
June 30, 2020 March 31,
2021 GAAP net loss
$
(66,781
)
$
(1,241,506
)
$
(1,101,793
)
Add back: Depreciation and amortization
585,504
680,375
690,074
Interest expense, net
145,471
145,528
138,009
Share-based compensation
167,033
105,005
167,472
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
26,468
225
17,180
(Gain) Loss on disposition of assets
11,187
-
(10,000
)
Non-GAAP adjusted EBITDA(1)
$
957,082
$
(222,173
)
$
(10,858
)
GAAP Revenue
$
3,399,109
$
2,024,388
$
2,424,653
Non-GAAP Adjusted EBITDA Margin
28.2
%
-11.0
%
(0.4
)%
(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/20210813005007/en/
Investor relations: Deborah K. Pawlowski, Kei Advisors
LLC (716) 843-3908, dpawlowski@keiadvisors.com
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