Try our mobile app
Exhibit 99.1
FOR IMMEDIATE RELEASE
Superior Drilling Products, Inc. Revenue Grew 52% to
$6.3 million with Expanded Margins and
Earnings per Share of $0.05 in First Quarter 2023
| ● | First quarter revenue rose $2.2 million, or 52%, to a record $6.3 million over the prior-year period and was up 19.5% sequentially |
| ○ | Tool revenue grew 54% and Contract Services revenue was up 49% |
| ● | Strong operating leverage resulted in measurably improved operating income of $1.4 million, or 21.9% of sales; Operating income nearly doubled sequentially | |
| ● | Achieved net income of $1.5 million or $0.05 per diluted share | |
| ● | Adjusted EBITDA* of $2.0 million nearly doubled; Adjusted EBITDA margin expanded 760 basis points to 32.1%, the highest level in recent history | |
| ● | 2023 outlook reaffirmed with revenue between $24 million to $27 million and Adjusted EBITDA* of $6.5 million to $7.5 million | |
| ● | Company in final stages of retaining advisor to assist with exploration of strategic alternatives |
*Adjusted EBITDA is a non-GAAP measure. See comments regarding the use of non-GAAP measures and the reconciliation of the first quarter GAAP to non-GAAP measures in the tables of this release
VERNAL, UT, May 11, 2023 — 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 ended March 31, 2023. The Company also announced that its Board of Directors has initiated a process to evaluate potential strategic transactions.
“We had an excellent first quarter as strong demand for our flagship Drill-N-Ream® (DNR) wellbore conditioning tool and contract services for the manufacture and refurbishment of drill bits drove record quarterly revenue of $6.3 million. Equally important was the continued demonstration of the significant leverage inherent in our operations as Adjusted EBITDA nearly doubled year-over-year to $2.0 million with EBITDA margin expanding 760 basis points to 32.1%, our highest level in recent history,” commented Troy Meier, Chairman and CEO.
“Looking ahead, we are making investments to support planned growth and are poised to capture greater share internationally as our strengthened Middle East team makes further inroads and leverages the new service and technology center in that region that is expected to come online by the end of the second quarter of 2023. On the domestic front, even while the rig count has flattened, we still see a lot of potential for expanding our contract services business as larger oil field service companies look to outsource manufacturing and repair, and recognize the investments we have made in facility and capacity enhancements, including the recently completed new machining center.”
- MORE -
Superior
Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 2 of 9
Strategic Review
Mr. Meier noted, “The Board and management have vetted a number of financial advisors and are in the final stages of retaining an advisor to investigate a range of strategic alternatives with the intent to maximize shareholder value.”
As part of the process, the Board will consider a full range of strategic alternatives, including sales, acquisitions, mergers, divestiture of assets, or other strategic transactions. There can be no assurance that any offers will be made or accepted, that any agreement will be executed, or that any transaction will be consummated, in connection with the strategic alternatives process. The Company does not intend to make further announcements about the strategic alternatives process unless and until the Board has approved a specific transaction or otherwise determines that further disclosure is appropriate or necessary.
First Quarter 2023 Review (See at “Definitions” the composition of product/service revenue categories.)
| ($ in thousands) | March
31, 2023 | December
31, 2022 | March
31, 2022 | Change Sequential | Change Year/Year | |||||||||||||||
| North America | 5,475 | 4,529 | 3,745 | 20.9 | % | 46.2 | % | |||||||||||||
| International | 806 | 726 | 385 | 11.1 | % | 109.3 | % | |||||||||||||
| Total Revenue | $ | 6,281 | $ | 5,254 | $ | 4,130 | 19.5 | % | 52.1 | % | ||||||||||
| Tool (DNR) Revenue | $ | 4,254 | 3,348 | $ | 2,769 | 27.1 | % | 53.6 | % | |||||||||||
| Contract Services | 2,027 | 1,906 | 1,361 | 6.3 | % | 48.9 | % | |||||||||||||
| Total Revenue | $ | 6,281 | # | $ | 5,254 | # | $ | 4,130 | 19.5 | % | 52.1 | % | ||||||||
Revenue growth reflects the recovery in the North America oil & gas industry, strengthened market share for the DNR domestically and internationally, and continued strong demand for the manufacture and refurbishment of drill bits and other related tools.
For the first quarter of 2023, North America revenue comprised approximately 87% of total revenue, with remaining sales all within the Middle East. Revenue growth in North America was due to increased tool revenue and strong growth in Contract Services. International revenue doubled year-over-year, which reflected improved market conditions and the strengthening of the Company’s Middle East technical sales and marketing team.
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 3 of 9
First Quarter 2023 Operating Costs
| ($ in thousands, except per share amounts) | March
31, 2023 | December
31, 2022 | March
31, 2022 | Change Sequential | Change Year/Year | |||||||||||||||
| Cost of revenue | $ | 2,239 | $ | 2,163 | $ | 1,768 | 3.5 | % | 26.6 | % | ||||||||||
| As a percent of sales | 35.6 | % | 41.2 | % | 42.8 | % | ||||||||||||||
| Selling, general & administrative | $ | 2,339 | $ | 2,062 | $ | 1,647 | 13.4 | % | 42.0 | % | ||||||||||
| As a percent of sales | 37.2 | % | 39.2 | % | 39.9 | % | ||||||||||||||
| Depreciation & amortization | $ | 326 | $ | 328 | $ | 411 | (0.6 | )% | (20.7 | )% | ||||||||||
| Total operating expenses | $ | 4,903 | $ | 4,553 | $ | 3,825 | 7.7 | % | 28.2 | % | ||||||||||
| Operating Income | $ | 1,378 | $ | 701 | $ | 305 | 96.5 | % | 351.7 | % | ||||||||||
| As a % of sales | 21.9 | % | 13.3 | % | 7.4 | % | ||||||||||||||
| Other
income (expense) including Income tax | $ | 135 | $ | (368 | ) | $ | (155 | ) | NM | NM | ||||||||||
| Net Income | $ | 1,513 | $ | 333 | $ | 150 | 354.4 | % | 908.8 | % | ||||||||||
| Diluted earnings per share | $ | 0.05 | $ | 0.01 | $ | 0.01 | ||||||||||||||
| Adjusted EBITDA¹ | $ | 2,019 | $ | 1,350 | $ | 1,014 | 49.6 | % | 99.1 | % | ||||||||||
| As a % of sales | 32.1 | % | 25.7 | % | 24.5 | % | ||||||||||||||
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.
Higher volume combined with favorable mix, improved processes and operational efficiencies are resulting in enhanced leverage despite continued investments in people, inflationary pressures, and higher legal expenses. Selling, general & administrative (SG&A) expenses were 37.2% of revenue, down 270 basis points year-over-year, and down 200 basis points sequentially. SG&A expenses in the first quarter of 2023 included $360 thousand of legal expenses due to continuing litigation for the Company’s patent infringement lawsuit over violations of the patents on its DNR tool.
Depreciation and amortization expense decreased approximately 21% year-over-year to $326 thousand as a result of fully amortizing a portion of intangible assets and fully depreciating manufacturing center equipment.
Other income in 2023 included $350 thousand for the recovery of a related party note receivable, whereas the comparable 2022 periods did not have a similar benefit.
Balance Sheet and Liquidity
Cash at the end of the quarter was $2.0 million. Cash generated by operations for the quarter was $1.0 million compared with $1.1 million in the year-ago period.
Capital expenditures of $1.6 million were related to the completion of the domestic machining capacity expansion, higher maintenance activities, and in support of the Company’s Middle East operations, which included the DNR rental tool fleet and the new service and technology center. The Company has revised its expected capital spending for fiscal 2023 to range between $3.5 million to $4.0 million, from the previous expected range of $3.0 million to $3.5 million.
Total debt at quarter-end was $1.6 million.
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 4 of 9
2023 Guidance
Revenue: $24.0 million to $27.0 million
SG&A: $9.0 million to $10.0 million (includes approximately $1 million in legal expenses for ongoing patent infringement litigation)
Adjusted EBITDA1: $6.5 million to $7.5 million
1See “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 6:30 am Mountain Time (8:30 am Eastern Time) 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 11:00 am MT (1:00 pm ET) the day of the teleconference until Thursday, May 18, 2023. To listen to the archived call, please call (412) 317-6671 and enter conference ID number 13738117 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® 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.
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 5 of 9
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 Company’s strategic review process, 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 2023 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.
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
FINANCIAL TABLES FOLLOW.
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 6 of 9
Superior Drilling Products, Inc.
Consolidated Condensed Statements of Operations
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| North America | $ | 5,475,061 | $ | 3,745,014 | ||||
| International | 806,153 | 385,150 | ||||||
| Total Revenue | $ | 6,281,214 | $ | 4,130,164 | ||||
| Operating cost and expenses | ||||||||
| Cost of revenue | $ | 2,238,597 | $ | 1,767,903 | ||||
| Selling, general, and administrative expenses | 2,338,841 | 1,646,643 | ||||||
| Depreciation and amortization expense | 326,014 | 410,733 | ||||||
| Total operating cost and expenses | $ | 4,903,452 | $ | 3,825,279 | ||||
| Operating income | $ | 1,377,762 | $ | 304,885 | ||||
| Other income (expense) | ||||||||
| Interest income | 16,898 | 197 | ||||||
| Interest expense | (154,091 | ) | (123,861 | ) | ||||
| Recovery of related party note receivable | 350,262 | - | ||||||
| Total other income (expense) | 213,069 | (123,664 | ) | |||||
| Income before income taxes | 1,590,831 | 181,221 | ||||||
| Income tax expense | (77,612 | ) | (31,384 | ) | ||||
| Net income | $ | 1,513,219 | $ | 149,837 | ||||
| Earnings per common share - basic | $ | 0.05 | $ | 0.01 | ||||
| Weighted average common shares outstanding - basic | 29,245,080 | 28,235,001 | ||||||
| Earnings per common share - diluted | $ | 0.05 | $ | 0.01 | ||||
| Weighted average common shares outstanding - diluted | 29,305,216 | 28,305,101 | ||||||
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 7 of 9
Superior Drilling Products, Inc.
Consolidated Condensed Balance Sheets
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,955,903 | $ | 2,158,025 | ||||
| Accounts receivable | 3,959,754 | 3,241,221 | ||||||
| Prepaid expenses | 356,696 | 367,823 | ||||||
| Inventories | 2,248,861 | 2,081,260 | ||||||
| Asset held for sale | - | 216,000 | ||||||
| Other current assets | 152,219 | 140,238 | ||||||
| Total current assets | 8,673,433 | 8,204,567 | ||||||
| Property, plant and equipment, net | 10,241,092 | 8,576,851 | ||||||
| Intangible assets, net | 27,778 | 69,444 | ||||||
| Right of use assets (net of amortization) | 606,323 | 638,102 | ||||||
| Other noncurrent assets | 112,619 | 111,519 | ||||||
| Total assets | $ | 19,661,245 | $ | 17,600,483 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 1,664,491 | $ | 1,043,581 | ||||
| Accrued expenses | 782,054 | 891,793 | ||||||
| Accrued income tax | 427,165 | 351,618 | ||||||
| Current portion of operating lease liability | 51,182 | 44,273 | ||||||
| Current portion of financial obligation | 76,406 | 74,636 | ||||||
| Current portion of long-term debt, net of discounts | 1,157,879 | 1,125,864 | ||||||
| Other current liabilities | - | 216,000 | ||||||
| Total current liabilities | 4,159,177 | 3,747,765 | ||||||
| Operating lease liability, less current portion | 493,296 | 523,375 | ||||||
| Long-term financial obligation, less current portion | 4,017,280 | 4,038,022 | ||||||
| Long-term debt, less current portion, net of discounts | 489,303 | 529,499 | ||||||
| Deferred income | 675,000 | 675,000 | ||||||
| Total liabilities | 9,834,056 | 9,513,661 | ||||||
| Shareholders’ equity | ||||||||
| Common stock - $0.001 par value; 100,000,000 shares authorized; 29,245,080 shares issued and outstanding | 29,245 | 29,245 | ||||||
| Additional paid-in-capital | 44,171,076 | 43,943,928 | ||||||
| Accumulated deficit | (34,373,132 | ) | (35,886,351 | ) | ||||
| Total shareholders’ equity | 9,827,189 | 8,086,822 | ||||||
| Total liabilities and shareholders’ equity | $ | 19,661,245 | $ | 17,600,483 | ||||
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 8 of 9
Superior Drilling Products, Inc.
Consolidated Statements of Cash Flows
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | 1,513,219 | $ | 149,837 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expense | 326,013 | 410,733 | ||||||
| Share-based compensation expense | 227,148 | 210,133 | ||||||
| Amortization of right-of-use assets | 51,257 | - | ||||||
| Amortization of deferred loan cost | 3,087 | 4,631 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (718,533 | ) | (283,974 | ) | ||||
| Inventories | (167,601 | ) | 150,290 | |||||
| Prepaid expenses and other current assets | (1,954 | ) | 186,508 | |||||
| Accounts payable, accrued expenses, and other liabilities | (262,803 | ) | 248,560 | |||||
| Income tax payable | 75,547 | 6,388 | ||||||
| Net cash provided by operating activities | 1,045,380 | 1,083,106 | ||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of property, plant and equipment | (1,567,524 | ) | (919,127 | ) | ||||
| Proceeds from recovery of related party note receivable | 350,262 | - | ||||||
| Net cash used in investing activities | (1,217,262 | ) | (919,127 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Principal payments on debt | (213,905 | ) | (131,978 | ) | ||||
| Payments on revolving loan | (472,089 | ) | (21,541 | ) | ||||
| Proceeds received from revolving loan | 655,754 | 21,533 | ||||||
| Net cash used in financing activities | (30,240 | ) | (131,986 | ) | ||||
| Net (decrease) increase in cash | (202,122 | ) | 31,993 | |||||
| Cash at beginning of period | 2,158,025 | 2,822,100 | ||||||
| Cash at end of period | $ | 1,955,903 | $ | 2,854,093 | ||||
- MORE -
Superior Drilling Products, Inc. Revenue Grew 52% to $6.3 million with Expanded Margins and Earnings per Share of $0.05 in First Quarter 2023
May 11, 2023
Page 9 of 9
Superior Drilling Products, Inc.
Adjusted EBITDA1 Reconciliation
(unaudited)
| Three Months Ended | ||||||||||||
| March 31, 2023 | March 31, 2022 | December 31, 2022 | ||||||||||
| GAAP net income | $ | 1,513,219 | $ | 149,837 | $ | 333,096 | ||||||
| Add back: | ||||||||||||
| Depreciation and amortization | 326,014 | 410,733 | 327,825 | |||||||||
| Interest expense, net | 137,193 | 123,664 | 148,962 | |||||||||
| Share-based compensation | 227,148 | 210,133 | 232,921 | |||||||||
| Net non-cash compensation | 88,200 | 88,200 | 88,200 | |||||||||
| Income tax expense | 77,612 | 31,384 | 87,117 | |||||||||
| Recovery of Related Party Note Receivable | (350,262 | ) | - | - | ||||||||
| Impairment of asset | - | - | 130,375 | |||||||||
| Loss on disposition of assets | - | - | 1,550 | |||||||||
| Non-GAAP adjusted EBITDA¹ | $ | 2,019,124 | $ | 1,013,951 | $ | 1,350,046 | ||||||
| GAAP Revenue | $ | 6,281,214 | $ | 4,130,164 | $ | 5,254,136 | ||||||
| Non-GAAP Adjusted EBITDA Margin | 32.1 | % | 24.5 | % | 25.7 | % | ||||||
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.
- END -
