Superior Drilling Products Reports First Quarter 2024 Results
Superior Drilling Products (SDPI) reported Q1 2024 financial results. The company's total revenue was $4.95 million, down 21.3% year-over-year but up 15.8% sequentially. North America contributed 86% of this revenue, while international sales grew 10.1% sequentially. The decline in tool sales was attributed to a reduced U.S. rig count. Operating income was $159,000, down 88.4% year-over-year. Net loss stood at $1.82 million, largely impacted by $1.7 million in acquisition-related expenses. Adjusted EBITDA increased 91% sequentially to $839,000. A merger agreement with Drilling Tools International, valued at $32.2 million, is expected to close in Q3 2024.
- Sequential revenue growth of 15.8% to $4.95 million.
- North American revenue increased 16.8% sequentially.
- International revenue grew 10.1% sequentially.
- Adjusted EBITDA rose 91% sequentially to $839,000.
- SG&A expenses decreased 9% year-over-year.
- Year-over-year revenue decline of 21.3%.
- Net loss of $1.82 million, including $1.7 million in acquisition-related expenses.
- Tool revenue dropped 29.9% year-over-year due to reduced U.S. rig count.
- Operating income fell 88.4% year-over-year to $159,000.
- Operational cash flow turned negative, using $304,000 compared to generating $1 million in Q1 2023.
Insights
The recent financial results released by Superior Drilling Products, Inc. highlight several key trends and issues. First, the company's revenue has declined
The announcement of the acquisition by Drilling Tools International Corp. for
For retail investors, it’s critical to stay updated on the progression of this acquisition, as it will likely influence the stock's performance in the upcoming quarters.
The decline in tool sales is a concerning trend. However, the sequential growth in international revenue by
However, the overall market conditions and the fluctuating rig counts in North America, which contribute to
From a legal perspective, the acquisition announcement and the associated transaction details are pivotal. The
Investors should be aware of the regulatory scrutiny such transactions face. The filing of the registration statement on Form S-4 with the SEC and the subsequent need for shareholder approval adds layers of legal oversight. It's important for retail investors to stay informed about any regulatory hurdles or shareholder dissent that could delay or alter the terms of the acquisition.
First Quarter 2024 Revenue Review (See at “Definitions” the composition of product/service revenue categories.) |
||||||||||||||
| ($ in thousands) | March 31, 2024 |
December 31, 2023 |
March 31, 2023 |
Change Sequential |
Change Year/Year |
|||||||||
$ |
4,249 |
$ |
3,639 |
$ |
5,475 |
16.8 |
% |
(22.4 |
)% |
|||||
| International |
|
697 |
|
633 |
|
806 |
10.1 |
% |
(13.5 |
)% |
||||
| Total Revenue | $ |
4,946 |
$ |
4,273 |
$ |
6,281 |
15.8 |
% |
(21.3 |
)% |
||||
| Tool (DNR) Revenue | $ |
2,981 |
$ |
2,512 |
$ |
4,254 |
18.7 |
% |
(29.9 |
)% |
||||
| Contract Services |
|
1,965 |
|
1,761 |
|
2,027 |
11.6 |
% |
(3.1 |
)% |
||||
| Total Revenue | $ |
4,946 |
$ |
4,273 |
$ |
6,281 |
15.8 |
% |
(21.3 |
)% |
||||
The year-over-year change in revenue was impacted by lower tool sales, which largely reflected the decline in
The Company’s
International revenue growth was
For the first quarter of 2024,
First Quarter 2024 Operating Results |
|||||||||||||||||
| ($ in thousands, except per share amounts) | March 31, 2024 |
December 31, 2023 |
March 31, 2023 |
Change Sequential |
Change Year/Year |
||||||||||||
| Cost of revenue | $ |
2,305 |
|
$ |
1,939 |
|
$ |
2,239 |
|
18.9 |
% |
3.0 |
% |
||||
| As a percent of sales |
|
46.6 |
% |
|
45.4 |
% |
|
35.6 |
% |
||||||||
| Selling, general & administrative | $ |
2,130 |
|
$ |
2,263 |
|
$ |
2,339 |
|
(5.8 |
)% |
(8.9 |
)% |
||||
| As a percent of sales |
|
43.1 |
% |
|
53.0 |
% |
|
37.2 |
% |
||||||||
| Depreciation & amortization | $ |
351 |
|
$ |
344 |
|
$ |
326 |
|
2.0 |
% |
7.7 |
% |
||||
| Total operating expenses | $ |
4,787 |
|
$ |
4,546 |
|
$ |
4,903 |
|
5.3 |
% |
(2.4 |
)% |
||||
| Operating income (loss) | $ |
159 |
|
$ |
(273 |
) |
$ |
1,378 |
|
NM |
|
(88.4 |
)% |
||||
| As a % of sales |
|
3.2 |
% |
|
-6.4 |
% |
|
21.9 |
% |
||||||||
| Other (expense) including income tax | $ |
(1,982 |
) |
$ |
5,859 |
|
$ |
(135 |
) |
NM |
|
NM |
|
||||
| Net (loss) Income | $ |
(1,822 |
) |
$ |
5,586 |
|
$ |
1,513 |
|
NM |
|
NM |
|
||||
| Diluted earnings per share | $ |
(0.06 |
) |
$ |
0.18 |
|
$ |
0.05 |
|
||||||||
| Adjusted EBITDA¹ | $ |
839 |
|
$ |
439 |
|
$ |
2,019 |
|
91.0 |
% |
(58.4 |
)% |
||||
| As a % of sales |
|
17.0 |
% |
|
10.3 |
% |
|
32.1 |
% |
||||||||
1Adjusted 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 to Adjusted EBITDA. |
|||||||||||||||||
The cost of revenue increase reflected the underutilization of manufacturing resources given the reduced demand, as well as increased headcount, operating supplies and travel in the ME. Selling, general and administrative (SG&A) expenses decreased
Included in other expenses and reflected in the net loss for the first quarter of 2024 was
Balance Sheet and Liquidity
For the three months ended March 31, 2024, net cash used in operating activities was
Capital expenditures of
Total debt at quarter-end was
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® 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 leading oil field service companies. 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.
Additional Information for Superior Drilling Products, Inc. Shareholders and Where to Find It
This press release relates to a proposed acquisition of Superior Drilling Products, Inc. ("SDP") by Drilling Tools International Corporation ("DTI"). In connection with the transaction, DTI filed a registration statement on Form S-4 on May 10, 2024, which includes a document that serves as a prospectus of DTI and a proxy statement of SDP (the "joint proxy statement/prospectus"), and each party will file other relevant documents regarding the transaction with the Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY, INCLUDING THE SCHEDULE 13E-3, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. A definitive joint proxy statement/prospectus will be sent to shareholders of SDP. Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus and other relevant documents filed with the SEC through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by DTI will be available free of charge on the DTI website at www.drillingtools.com or by contacting DTI by email at InvestorRelations@drillingtools.com or by mail at 3710 Briarpark Drive, Suite 150,
Participants in the Solicitation
DTI and SDP and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the SDP shareholders in connection with the proposed transaction. Information about the directors and executive officers of DTI is set forth in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 28, 2024, and in other documents filed with the SEC by DTI and its executive officers and directors. Information about the directors and executive officers of SDP is set forth in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 15, 2024, and in other documents filed with the SEC by SDP and its executive officers and directors.
These documents can be obtained free of charge from the sources indicated above. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and Schedule 13e-3 and other relevant materials in connection with the transaction to be filed with the SEC when they become available. Information concerning the interests of the participants in the solicitation, which may, in some cases, be different than those of SDP’s shareholders generally, will be set forth in the joint prospectus/proxy statement relating to the proposed transaction and the Schedule 13e-3 when they become available. Investors should read the proxy statement/prospectus and Schedule 13e-3 carefully before making any voting or investment decisions.
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 limitation, statements regarding the proposed transaction, 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," "plan or "will," 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 effectiveness of success at expansion in the
FINANCIAL TABLES FOLLOW
Superior Drilling Products, Inc. |
|||||||
Consolidated Condensed Statements of Operations |
|||||||
(unaudited) |
|||||||
| Three Months Ended March 31, | |||||||
|
2024 |
|
|
2023 |
|
||
| Revenue | |||||||
$ |
4,249,150 |
|
$ |
5,475,061 |
|
||
| International |
|
697,066 |
|
|
806,153 |
|
|
| Total Revenue | $ |
4,946,216 |
|
$ |
6,281,214 |
|
|
Operating cost and expenses |
|||||||
| Cost of revenue | $ |
2,305,068 |
|
$ |
2,238,597 |
|
|
| Selling, general, and administrative expenses |
|
2,130,488 |
|
|
2,338,841 |
|
|
| Depreciation and amortization expense |
|
351,213 |
|
|
326,014 |
|
|
| Total operating cost and expenses | $ |
4,786,769 |
|
$ |
4,903,452 |
|
|
| Operating income | $ |
159,447 |
|
$ |
1,377,762 |
|
|
| Other income (expense) | |||||||
| Interest income |
|
20,691 |
|
|
16,898 |
|
|
| Interest expense |
|
(194,008 |
) |
|
(154,091 |
) |
|
| Acquisition expense |
|
(1,748,277 |
) |
|
- |
|
|
| Recovery of related party note receivable |
|
- |
|
|
350,262 |
|
|
| Loss on disposition of assets |
|
(5,819 |
) |
|
- |
|
|
| Total other (expense) income |
|
(1,927,413 |
) |
|
213,069 |
|
|
| (Loss) Income before income taxes |
|
(1,767,966 |
) |
|
1,590,831 |
|
|
| Income tax expense |
|
(54,422 |
) |
|
(77,612 |
) |
|
| Net (loss) income | $ |
(1,822,388 |
) |
$ |
1,513,219 |
|
|
| (Loss) Earnings per common share - basic | $ |
(0.06 |
) |
$ |
0.05 |
|
|
| Weighted average common shares outstanding - basic |
|
30,391,244 |
|
|
29,245,080 |
|
|
| (Loss) Earnings per common share - diluted | $ |
(0.06 |
) |
$ |
0.05 |
|
|
| Weighted average common shares outstanding - diluted |
|
30,391,244 |
|
|
29,276,716 |
|
|
Superior Drilling Products, Inc. |
||||||||
Consolidated Condensed Balance Sheets |
||||||||
March 31, |
December 31, |
|||||||
|
2024 |
|
|
2023 |
|
|||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ |
2,080,224 |
|
$ |
2,670,626 |
|
||
| Accounts receivable |
|
2,355,947 |
|
|
2,670,361 |
|
||
| Prepaid expenses |
|
323,214 |
|
|
335,152 |
|
||
| Inventories |
|
2,695,666 |
|
|
2,706,491 |
|
||
| Other current assets |
|
433,090 |
|
|
373,587 |
|
||
| Total current assets |
|
7,888,141 |
|
|
8,756,217 |
|
||
| Property, plant and equipment, net |
|
11,037,332 |
|
|
11,242,251 |
|
||
| Right of use assets (net of amortization) |
|
395,453 |
|
|
451,094 |
|
||
| Deferred tax asset |
|
6,407,195 |
|
|
6,387,240 |
|
||
| Other noncurrent assets |
|
199,816 |
|
|
199,816 |
|
||
| Total assets | $ |
25,927,937 |
|
$ |
27,036,618 |
|
||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ |
1,775,936 |
|
$ |
1,547,619 |
|
||
| Accrued expenses |
|
1,300,744 |
|
|
870,060 |
|
||
| Accrued income tax |
|
651,081 |
|
|
626,455 |
|
||
| Current portion of operating lease liability |
|
55,019 |
|
|
54,034 |
|
||
| Current portion of long-term financial obligation |
|
86,685 |
|
|
83,648 |
|
||
| Current portion of long-term debt, net of discounts |
|
543,771 |
|
|
635,273 |
|
||
| Total current liabilities |
|
4,413,236 |
|
|
3,817,089 |
|
||
| Operating lease liability, less current portion |
|
278,751 |
|
|
325,480 |
|
||
| Long-term financial obligation, less current portion |
|
3,930,595 |
|
|
3,954,373 |
|
||
| Long-term debt, less current portion, net of discounts |
|
1,557,351 |
|
|
1,609,868 |
|
||
| Deferred income |
|
675,000 |
|
|
675,000 |
|
||
| Total liabilities |
|
10,854,933 |
|
|
10,381,810 |
|
||
| Shareholders’ equity | ||||||||
| Common stock (30,391,240 and 28,235,001) |
|
30,391 |
|
|
30,391 |
|
||
| Additional paid-in-capital |
|
45,315,307 |
|
|
45,074,723 |
|
||
| Accumulated deficit |
|
(30,272,694 |
) |
|
(28,450,306 |
) |
||
| Total shareholders’ equity |
|
15,073,004 |
|
|
16,654,808 |
|
||
| Total liabilities and shareholders’ equity | $ |
25,927,937 |
|
$ |
27,036,618 |
|
||
Superior Drilling Products, Inc. |
|||||||||
Consolidated Statements of Cash Flows |
|||||||||
(unaudited) |
|||||||||
| Three Months Ended March 31, | |||||||||
|
2024 |
|
|
2023 |
|
||||
| Cash Flows from Operating Activities | |||||||||
| Net (loss) income | $ |
(1,822,388 |
) |
|
1,513,219 |
|
|||
| Adjustments to reconcile net income to net cash provided by | |||||||||
| operating activities: | |||||||||
| Depreciation and amortization expense |
|
351,215 |
|
|
326,014 |
|
|||
| Amortization of right-of-use assets |
|
55,641 |
|
|
51,257 |
|
|||
| Share-based compensation expense |
|
240,584 |
|
|
227,148 |
|
|||
| Deferred tax asset |
|
(19,955 |
) |
|
- |
|
|||
| Loss on disposition of rental fleet |
|
2,806 |
|
|
- |
|
|||
| Loss on sale or dispositon of assets |
|
3,013 |
|
|
- |
|
|||
| Amortization of deferred loan cost |
|
4,519 |
|
|
3,087 |
|
|||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable |
|
314,414 |
|
|
(718,533 |
) |
|||
| Inventories |
|
10,825 |
|
|
(167,601 |
) |
|||
| Prepaid expenses and other current assets |
|
(47,565 |
) |
|
(1,954 |
) |
|||
| Accounts payable, accrued expenses, and other liabilities |
|
578,315 |
|
|
(262,804 |
) |
|||
| Income Tax expense |
|
24,626 |
|
|
75,547 |
|
|||
| Net cash (used in) provided by operating activities | $ |
(303,950 |
) |
$ |
1,045,380 |
|
|||
| Cash Flows From Investing Activities | |||||||||
| Purchases of property, plant and equipment |
|
(122,483 |
) |
|
(1,567,524 |
) |
|||
| Proceeds on sale of assets |
|
5,310 |
|
|
- |
|
|||
| Proceeds from recovery of related party note receivable |
|
- |
|
|
350,262 |
|
|||
| Net cash used in investing activities | $ |
(117,173 |
) |
$ |
(1,217,262 |
) |
|||
| Cash Flows from Financing Activities | |||||||||
| Principal payments on debt |
|
(241,985 |
) |
|
(213,905 |
) |
|||
| Proceeds received from debt borrowings |
|
72,706 |
|
|
- |
|
|||
| Payments on revolving loan |
|
- |
|
|
(472,089 |
) |
|||
| Proceeds received from revolving loan |
|
- |
|
|
655,754 |
|
|||
| Net cash used in financing activities | $ |
(169,279 |
) |
$ |
(30,240 |
) |
|||
| Net decrease in cash |
|
(590,403 |
) |
|
(202,122 |
) |
|||
| Cash at beginning of period |
|
2,670,626 |
|
|
2,158,025 |
|
|||
| Cash at end of period | $ |
2,080,223 |
|
$ |
1,955,903 |
|
|||
Superior Drilling Products, Inc. |
|||||||||||
Adjusted EBITDA Reconciliation |
|||||||||||
| Three Months Ended | |||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
| GAAP net income | $ |
(1,822,388 |
) |
$ |
5,585,820 |
|
$ |
1,513,219 |
|
||
| Add back: | |||||||||||
| Depreciation and amortization |
|
351,215 |
|
|
344,322 |
|
|
326,014 |
|
||
| Interest expense, net |
|
173,317 |
|
|
183,984 |
|
|
137,193 |
|
||
| Share-based compensation |
|
240,584 |
|
|
237,373 |
|
|
227,148 |
|
||
| Net non-cash compensation |
|
88,200 |
|
|
88,200 |
|
|
88,200 |
|
||
| Income tax expense (benefit) |
|
54,422 |
|
|
(6,312,108 |
) |
|
77,612 |
|
||
| Recovery of Related Party Note Receivable |
|
- |
|
|
198,894 |
|
|
(350,262 |
) |
||
| Employee Severance Cost |
|
- |
|
|
42,294 |
|
|
- |
|
||
| Acquistion expense |
|
1,748,277 |
|
|
- |
|
|
- |
|
||
| Loss on disposition of assets |
|
5,819 |
|
|
70,663 |
|
|
- |
|
||
| Non-GAAP adjusted EBITDA¹ | $ |
839,446 |
|
$ |
439,442 |
|
$ |
2,019,124 |
|
||
| GAAP Revenue | $ |
4,946,216 |
|
$ |
4,272,784 |
|
$ |
6,281,214 |
|
||
| Non-GAAP Adjusted EBITDA Margin |
|
17.0 |
% |
|
10.3 |
% |
|
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/20240514270979/en/
For more information, contact investor relations:
Deborah K. Pawlowski / Craig P. Mychajluk
Kei Advisors LLC
716-843-3908 / 716-843-3832
dpawlowski@keiadvisors.com / cmychajluk@keiadvisors.com
Source: Superior Drilling Products, Inc.
FAQ
What were SDPI's Q1 2024 revenues?
How did SDPI's North American revenue perform in Q1 2024?
What was SDPI's net income for Q1 2024?
How much did SDPI's tool revenue decrease year-over-year?
What is the value of SDPI's merger agreement with Drilling Tools International?
When is the SDPI and Drilling Tools International merger expected to close?
What were SDPI's Adjusted EBITDA figures for Q1 2024?
What was the reason for SDPI's revenue decline in Q1 2024?
How did international revenue perform for SDPI in Q1 2024?
What were SDPI's operating expenses in Q1 2024?
