Superior Drilling Products, Inc. Grew Revenue 156% and Achieved Earnings per Share of $0.02 in Fourth Quarter 2021

Rhea-AI Summary

Superior Drilling Products, Inc. (SDPI) reported robust fourth quarter revenue of $4.0 million, over 2.5 times last year and up 11% sequentially. For the full year 2021, revenue reached $13.3 million, a 27% increase fueled by surging demand for the Drill-N-Ream® tool amid a North American oil and gas recovery. The company achieved net income of $645 thousand for the quarter and Adjusted EBITDA of $827 thousand, representing 20.9% of revenue. Shareholders' equity stood at $6.1 million by year-end, reflecting positive financial health.

Positive

• Fourth quarter revenue grew 156.3% year-over-year to $4.0 million.
• Full year revenue increased 27% to $13.3 million, driven by high demand for tools.
• Net income of $645 thousand for the quarter, an improvement over the prior year.
• Adjusted EBITDA improved to $827 thousand, representing 20.9% of revenue.

Negative

• Operating costs rose, with cost of revenue increasing by 23.2% sequentially.
• Operating income declined to $90 thousand from $163 thousand sequentially.
• Gross margin was affected by labor shortages and supply chain constraints.

•  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

VERNAL, Utah--(BUSINESS WIRE)-- 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				Change Sequential			Change Year/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				Change Sequential			Change Year/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 including income 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 of related-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

Source: Superior Drilling Products, Inc.

FAQ

What were Superior Drilling Products' Q4 2021 earnings?

In Q4 2021, Superior Drilling Products reported earnings of $645 thousand.

How much revenue did SDPI generate in 2021?

In 2021, SDPI generated $13.3 million in revenue, a 27% increase year-over-year.

What is SDPI's Adjusted EBITDA for Q4 2021?

SDPI's Adjusted EBITDA for Q4 2021 was $827 thousand, or 20.9% of revenue.

How did the North American market impact SDPI's revenue?

North America accounted for approximately 90% of SDPI's revenue, reflecting significant market demand.