- First quarter revenue grew $0.9 million to $2.4 million
over trailing fourth quarter as market steadily improves
- U.S. market conditions strengthening and market share expanding
driving revenue in North America up 74% over trailing quarter
- Tool revenue grew 84% over the trailing quarter while Contract
Services revenue was up 19%
- Cost savings efforts and improved revenue resulted in positive
cash generation from operations; ended quarter with $2.3 million of
cash on hand
- Restructured international team to build market opportunity
while expanding relationships with major oil field service
companies to deepen market reach
Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or
the “Company”), a designer and manufacturer of drilling tool
technologies, today reported financial results for the first
quarter of 2021 ended March 31, 2021.
Troy Meier, Chairman and CEO, commented, “The pace of activity
is encouraging as markets begin to recover. Demand for new
Drill-N-Ream® well bore conditioning tools in North America
continued through April as market conditions strengthen. We believe
we are also continuing to gain market share in this depressed
environment as more operators recognize both the production
efficiencies gained and costs saved when using the DNR for their
drilling operations. Drill bit refurbishment activity has increased
as well during the quarter, with the growing number of drill rigs
operating in the U.S.”
He added, “We are bringing back fabricators, advancing new drill
bit development and we are making progress on broader marketing and
servicing agreements with much larger entities that have the
breadth to extend and deepen our market reach. While we are not
expecting the market in the U.S. to return to pre-COVID levels, we
believe that there is still plenty of room for improvement and more
market penetration potential for the DNR. We have also restructured
our international development team to improve returns on our
investments in those markets while also advancing the agreements
needed to gain market share.”
Mr. Meier concluded, “We are optimistic about the recovery
supporting growth through 2021. More significantly, we are excited
about the changes we are making in the organization and the
relationships we are building that we expect to drive significant
growth for the Company in the long-term.”
First Quarter 2021 Review ($ in thousands, except per
share amounts) (See at “Definitions” the composition of
product/service revenue categories.)
($ in thousands, except per share amounts)
March 31,2021
December 31,2020 March 31,2020
ChangeSequential ChangeYear/Year North America
2,092
1,203
4,581
73.9
%
(54.3
)%
International
332
338
777
(1.7
)%
(57.2
)%
Total Revenue
$
2,425
$
1,541
$
5,358
57.3
%
(54.7
)%
Tool Sales/Rental
$
831
$
342
$
1,768
143.0
%
(53.0
)%
Other Related Tool Revenue
832
561
1,845
48.3
%
(54.9
)%
Tool Revenue
1,664
903
3,613
84.2
%
(54.0
)%
Contract Services
761
638
1,745
19.3
%
(56.4
)%
Total Revenue
$
2,425
$
1,541
$
5,358
57.3
%
(54.7
)%
Revenue increased sequentially $884 thousand, or 57%, over the
trailing fourth quarter as market share and market conditions
improved. The year-over-year comparison reflects the impact of the
global pandemic on the oil & gas production industry. The
market in North America is improving more rapidly than
international markets. Revenue in North America increased 74% from
increased tool sales, as well as higher royalty and repair fees.
Contract Services revenue also improved sequentially reflecting
increased drill bit refurbishment. International revenue was
relatively unchanged from the trailing fourth quarter as the market
recovery is lagging similar to the lag in decline this market had
through 2020.
First Quarter 2021 Operating Costs
($ in thousands,except per share amounts)
March 31,2021
December 31,2020 March 31,2020
ChangeSequential ChangeYear/Year Cost of revenue
$
1,176
$
821
$
2,315
43.2
%
(49.2
)%
As a percent of sales
48.5
%
53.3
%
43.2
%
Selling, general & administrative
$
1,516
$
1,483
$
2,018
2.2
%
(24.9
)%
As a percent of sales
62.5
%
96.2
%
37.7
%
Depreciation & amortization
$
690
$
682
$
761
1.2
%
(9.3
)%
Total operating expenses
$
3,381
$
2,986
$
5,093
13.2
%
(33.6
)%
Operating Income (loss)
$
(957
)
$
(1,445
)
$
265
NM
NM
As a % of sales
(39.5
)%
(93.8
)%
4.9
%
Other (expense) income includingincome tax (expense)
$
(145
)
$
790
$
(67
)
NM
NM
Net income (loss)
$
(1,102
)
$
(655
)
$
198
NM
NM
Diluted earnings (loss) per share
$
(0.04
)
$
(0.03
)
$
0.01
NM
NM
Adjusted EBITDA(1)
$
(11
)
$
(494
)
$
1,221
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.
Total operating expenses increased 13% over the trailing fourth
quarter, while revenue increased 57% demonstrating the effect of
cost reduction efforts and the operating leverage gained from
higher volume.
Net loss for the quarter was $1.1 million compared with $0.7
million in the trailing fourth quarter which included a $0.9
million benefit from the government forgiveness of SBA debt.
Compared with the trailing fourth quarter, Adjusted EBITDA(1)
improved sequentially as a result of increased sales and operating
leverage gained from higher volume.
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 $2.3 million, up from $2.0
million at the end of 2020. Cash provided by operations in the
first quarter of 2021 was $139 thousand. Long-term debt, including
the current portion at March 31, 2021, was $3.0 million. The $4.2
million long-term financial obligation is related to the future
minimum lease payments under the 15-year lease of the Company’s
Vernal, Utah property.
Definitions and Composition of Product/Service
Revenue:
Contract Services Revenue is comprised of drill bit and other
repair and manufacturing services.
Other Related Tool Revenue is comprised of royalties and fleet
maintenance fees.
Tool Sales/Rental revenue is comprised of revenue from either
the sale of tools or tools rented 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 Wednesday, May 19, 2021. To
listen to the archived call, please call (412) 317-6671 and enter
conference ID number 13718357, 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
Ended March 31,
2021
2020
Revenue North America
$
2,092,200
$
4,580,510
International
332,453
777,253
Total revenue
$
2,424,653
$
5,357,763
Operating cost and expenses Cost of revenue
1,175,593
2,314,508
Selling, general, and administrative expenses
1,515,590
2,017,899
Depreciation and amortization expense
690,074
760,764
Total operating costs and expenses
3,381,257
5,093,171
Operating Income (loss)
(956,604
)
264,592
Other income (expense) Interest income
48
4,688
Interest expense
(138,057
)
(177,258
)
Loss on Fixed Asset Impairment
-
(30,000
)
Gain (loss) on sale or disposition of assets
10,000
142,234
Total other expense
(128,009
)
(60,336
)
Income (loss) Before Income Taxes
$
(1,084,613
)
$
204,256
Income tax expense
(800
)
(6,210
)
Foreign Tax
(16,380
)
-
Net Income (loss)
$
(1,101,793
)
$
198,046
Basic income (loss) earnings per common share
$
(0.04
)
$
0.01
Basic weighted average common shares outstanding
25,762,342
25,418,126
Diluted income (loss) per common Share
$
(0.04
)
$
0.01
Diluted weighted average common shares outstanding
25,762,342
25,418,126
Superior Drilling Products,
Inc.
Consolidated Condensed Balance
Sheets
March 31, 2021 December 31, 2020 (unaudited)
Assets Current assets: Cash
$
2,262,251
$
1,961,441
Accounts receivable, net
1,601,837
1,345,622
Prepaid expenses
109,354
90,269
Inventories
996,083
1,020,008
Asset held for sale
-
40,000
Other current assets
42,751
40,620
Total current assets
5,012,276
4,497,960
Property, plant and equipment, net
7,211,648
7,535,098
Intangible assets, net
527,778
819,444
Right of use Asset (net of amortizaton)
$
65,624
$
99,831
Other noncurrent assets
84,115
87,490
Total assets
$
12,901,441
$
13,039,823
Liabilities and Owners' Equity Current liabilities:
Accounts payable
$
741,727
$
430,015
Accrued expenses
1,468,257
1,091,518
Accrued Income tax
122,826
106,446
Current portion of Operating Lease Liability
54,063
79,313
Current portion of Long-term Financial Obligation
59,420
61,691
Current portion of long-term debt, net of discounts
1,651,283
1,397,337
Total current liabilities
$
4,097,576
$
3,166,320
Operating long term liability
11,561
20,518
Long-term Financial Obligation
4,161,463
4,178,261
Long-term debt, less current portion, net of discounts
1,341,487
1,451,049
Total liabilities
$
9,612,087
$
8,816,148
Stockholders' equity Common stock (25,418,126 and
25,418,126)
25,762
25,762
Additional paid-in-capital
40,787,092
40,619,620
Accumulated deficit
(37,523,500
)
(36,421,707
)
Total stockholders' equity
$
3,289,354
$
4,223,675
Total liabilities and shareholders' equity
$
12,901,441
$
13,039,823
Superior Drilling Products, Inc. Consolidated Condensed
Statement of Cash Flows (Unaudited) March
31,2021 March 31, 2020 Cash Flows From Operating
Activities Net Income (Loss)
$
(1,101,793
)
$
198,046
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization expense
690,074
760,764
Share-based compensation expense
167,473
106,996
Loss (Gain) on sale or disposition of assets
(10,000
)
(142,234
)
Impairment on asset held for sale
-
30,000
Amortization of deferred loan cost
4,631
4,631
Changes in operating assets and liabilities: Accounts receivable
(256,215
)
625,419
Inventories
(41,795
)
(303,122
)
Prepaid expenses and other noncurrent assets
(17,841
)
296,392
Accounts payable and accrued expenses
688,451
660,731
Income Tax expense
16,380
6,210
Other long-term liabilities
-
(61,421
)
Net Cash Provided By Operating Activities
139,364
2,182,412
Cash Flows From Investing Activities Purchases of
property, plant and equipment
(9,237
)
(37,850
)
Proceeds from sale of fixed assets
50,000
117,833
Net Cash Provided By Investing Activities
40,763
79,983
Cash Flows From Financing Activities Principal
payments on debt
(135,403
)
(975,440
)
Proceeds received from debt borrowings
-
72,520
Payments on Revolving Loan
(280,245
)
(39,461
)
Proceeds received from Revolving Loan
536,331
812,224
Debt issuance Costs
-
-
Net Cash Provided By (Used In) Financing Activities
120,683
(130,157
)
Net change in Cash
300,810
2,132,238
Cash at Beginning of Period
1,961,441
1,217,014
Cash at End of Period
$
2,262,251
$
3,349,252
Supplemental information: Cash paid for interest
$
130,363
$
182,369
Non-cash payment of other liabilities by offsetting recovery of
related-party note receivable
$
-
$
-
Inventory converted to property, plant and equipment
$
65,720
$
47,907
Long term debt paid with Sale of Plane
$
-
$
211,667
Superior Drilling Products,
Inc.
Adjusted EBITDA(1)
Reconciliation
(unaudited)
($, in thousands)
Three Months Ended March 31,
2021 March 31, 2020 December 31, 2020
GAAP net income
$
(1,101,793
)
$
198,046
$
(655,142
)
Add back: Depreciation and amortization
690,074
760,764
681,998
Interest expense, net
138,009
172,570
125,068
Share-based compensation
167,473
106,996
180,730
Net non-cash compensation
88,200
88,200
88,200
Income tax expense
17,180
6,210
8,582
(Gain) Loss on disposition of assets
(10,000
)
(112,234
)
(891,600
)
Recovery of Related Party Note Receivable
-
-
-
Non-GAAP adjusted EBITDA(1)
$
(10,858
)
$
1,220,552
$
(494,164
)
GAAP Revenue
$
2,424,653
$
5,357,763
$
1,541,205
Non-GAAP Adjusted EBITDA Margin
(0.4
)%
22.8
%
(32.1
)%
(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/20210512005323/en/
For more information, contact investor relations: Deborah
K. Pawlowski, Kei Advisors LLC (716) 843-3908,
dpawlowski@keiadvisors.com
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