SDPI - Earnings call transcript Q4 2020 | Superior Drilling Products Inc

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Operator

Greetings and welcome to Superior Drilling Products, Inc. Fourth Quarter 2020 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Superior Drilling. Thank you.

begin. may You

Deborah Pawlowski

hello and and certainly your appreciate Thanks, interest everyone. in today your Superior time Doug We Drilling Products.

call with will Chris bit conditions today Financial full year On and about remarks, discussing will the call me and open quarter Meier, prepared then for Troy and the and fourth our go CEO questions. through and market Troy talk Cashion, in Officer. Chief XXXX the the our our we and Chris are Chairman a little

You and should of today. copy that the financial before the conversation results released have a also slides that market you the our we this have accompany morning will should

You can website those our on at find www.sdpi.com. both of documents

may make forward-looking the uncertainties would well from during Commission. that cause discussion apply during as and provided well as release, you as and Exchange to some as at in to formal the events future if These other filed company statements the Q&A are call. I These and is the look subject uncertainties by today’s we risks session will to on here what the differ Securities with X, statements risks So, that are Slide documents point earnings could today. results actual and stated slides other factors that out materially

some also these in measures, All financial useful to during performance. be out point or will will non-GAAP want found believe documents I that discuss can call, at our of on our which sec.gov. website evaluating be today’s we we

for of GAAP. accordance results or not in a the substitute isolation with presentation should information in additional consider You this prepared as

GAAP deck. earnings accompanying as as have in the reconciliations release comparable measures the in tables non-GAAP the We provided of well slide with

am with over to now to Troy So it to begin. Troy? I turn that, going

Troy Meier

for us XXXX and to X. Go Slide let’s fourth joining quarter Deb thanks everybody call. ahead for and our turn Thanks,

the of we some have QX. in accomplishments throughout XXXX about and that talk Let’s achieved

things didn’t touch to am that so just down of highlights to on at an locked these for look we led going lot balance of certification we XXXX, that this ISO a the as ASXXXX our sheet, our QMS the try and you achieved of just XXXX, a XXXX, and implementation got So, understanding in the We’ve of to I have and few our done throughout survive. but our system. strengthening we not

will company-wide we we have up throughout and So – QMS team very, talk that and as achievement well. team this our our a running, our big it’s have lead now, we diversification about was This for system also total very a model. working through And XXXX. got

go we helps getting As forward, this place. really, that really into put

We are business international able to team. our restructure

tremendous achieving product have into. as showing I team was Tuesday and post-run the Everything there are our already word have sit boots weaknesses now ground and we job we service over the with there, couldn’t has we going countries out place East, via mode really, phone in in I being our and done achieved. on on e-mail. well. have to know and introduced been in good still who done We though agreements the had strength done has there the the have lockdown the on and you even really product to an where we were want line and Mid KPIs large opportunity team. line team positions of out to able a able countries. multiple that providers a is and is every recaps. the tool on we service KPIs The few this The to we get in they a over, have go really call restructure that our look and have had years getting And what in all And at we job

very So we what pleased are we with are seeing.

able line. product are expand size We this the of scope and to

able is added and pay have to very we that some R&D now go and some hands contract amendments with as come go margins to look contract our revenue, up with. giving teams make our as legacy going a we expertise have forward. increase providers forward. at our tied to were very that as into engineering some that’s And opportunities It’s in enhancement rental our that going large very service we to design to forward We our us strong areas legacy had strong XXXX. are enhancements go that We that was

to with very make able amendments to the we I were contracts. So these pleased that am

past still XXXX. moving move throughout And just we have know we line it’s as product another that meaningful We about forward. are another and we not are bring be offering into to that XXXX going product on we forward the I introducing still talked Drill-N-Ream. offering that in go and we the

going through just through increased XXXX, not we of We our product collapse market, the as saw year-over-year. collapse, And international the will with But XXXX. support seen the market. we that we were international offering another that but have we also collapse XX% the throughout domestic of revenue

year the to the a their breakeven goal a we when hard we reduce We look XXXX that. have the in our and to at it’s work and the team we at was, this that willingness work We and out there took we end, and consolidations the our smart. our have be breakeven time made cash that were to you achieved cash, to look So, get and opportunity to to team. reductions, organization testament wanted management we get able throughout our get by

in have they us we well. stepping that and business opportunity is I have put our build core a our And to I University weaknesses. here going and and know really has we team They strong solid company what got values. And are our the to beyond. We strongly a up. team in, managers team. see has very refocused our our Management am that Superior really was to are on And that throughout They HR you, tell an a XXXX strengths have very the throughout ‘XX calling, It got products. our got system for place believe learned management have

am excited gets will about on future of some things Chris, neat I it we turn a bit that over Chris things talk about going to stuff I going and got opportunities little you. forward. after you about we financial the am looking side I to about So the more done tell those But talked and of the have

Chris Cashion

and Thank everyone. you, Okay. Troy welcome

balances our oil when markets encouraged in looking continue of we while fourth very at were you pandemic supply our the are the by Let’s And quarter the stabilized the impact the geopolitical and at look global Slide how obvious our our revenue This discussion of overview quarter. and provides revenue. an with X. trends, and

of that for February, in largest will U.S. that tools. continue new trend revenue increase a in distributor delivered the strong X% more additional sequentially encouraged two throughout count totaling we in of low U.S. America $XXX,XXX rig contract in the year fact, count XXXX. a increase quarter. That’s XX% late North on XXXX the a services orders, first an we Drill-N-Ream higher the in ended increasing we market to good resulted activity have with In of of from XXX. this increased tools an The and XXX. and QX, received are we Through begin rig We order $XXX,XXX our August buying over received

they the mentioned downturn international declined. in they Troy and that we what somewhat now lagged somewhat As And in is markets saw lagging the recovery.

million bright Middle tool partnering attribute to the using about and wellbore to Drill-N-Ream our recognition America despite challenging $X.X outside our and just revenue represents world’s companies. was total Troy a certainly and a of XX% our drill decline companies largest mentioned, the success international in of international and working international strategy the during benefits grew XX% with spot oilfield a the rigs However, XXXX. very go-to-market XXXX. rig year revenue. in and in East with conditioning North our success production XX% of our in the penetration Today, The revenue global XXXX, service of as growing calendar strategy of continued of the We

outside X now with and in operating we America are oilfield X North We countries service companies. partnering are

we and revenue. at Services take Now, to a what Contract and little tool Slide let’s X call turn deeper look

ship while Now pre-COVID revenue, business on the the XX% that’s mentioned, tool in And once sequentially. bar is those indeed again, we we as we Services is from now tool not the that the XXXX. international believe in XX% quarter down a high-end or did business, and we XXXX. our was part sales as direction. orders early sequentially. year sequentially of graph. did machining that rental as international as Contract referenced calendar Tool bit those just end included revenue was the and far I happen in revenue soft and refurbishment in did reminder this new trending And was mentioned, those we receive our and until late nearly levels, sales orders slide, right at And tools up it up $XXX,XXX is of third-party

repair related quarter-to-quarter. well as includes and Drill-N-Ream, However, steady which fees maintenance held as other from revenues, royalties, tool

royalty the U.S. in QX in what the In that’s is field and increasing revenue fact, held here Drill-N-Ream a up the the in of activity result of

reductions. to the phases see to to. three Now, costs our reduce throughout let’s took level significantly program program slide, and October third go in expenses XXXX organization. three-phase to million, to quarter of We On a year’s cost Slide aggressive the were that down breakeven cash cost got marketplace. X. of executed of In result sequentially, quarter different us you from from will fourth alluded last of lower actions down that to this monthly We fourth the XX% continuing Troy did the reduction operating that we response three-phase the total, X.X% right-size XXXX, demand revenue approximately of $XXX,XXX. The last reflecting down in phase that phase were and $X

$XX.X expenses a to for operating For year, $X declined XX% totaling million. controllable the reduction the cost year with million

level. entered the burn at rate operating we of Troy a monthly mentioned, cash approximately $XXX,XXX, cash breakeven XXXX, With company’s as just

the X, bottom the which reflect that This negative largely which marked improvement improvement of company’s that million reflect Now, spoke was the was a trailing in loan adjusted shows Adjusted loss in income in share. results. we $XXX,XXX quarter, line sequentially given third that quarter measure a was did $X.XX forgiveness Net as reductions to an performance, phase operational or of the used net and revenue, a the our of third on EBITDA $XXX,XXX which earlier. reflecting other about PPP let’s from go per to we quarter, $X.X of loss cost QX. we $XXX,XXX in similar EBITDA, Slide

and levels. XX Now, let’s balances go our and to at look take our a Slide debt cash

up and on up the at is XXXX cash million end see our of slide from of XXXX, the the million million, can end of $X.X at $X XXXX. the end $X.X this third You of that as from quarter

are where our pleased We going XXXX. cash about balances into are very

Now $X.X during a net of used the was fourth realizing our of our the which $X.X outstanding of property, leaseback million, of quarter, sale Utah million we balance property. on pay transaction total to mortgage the completed Vernal, proceeds

the quarter that since including recognized public an in in $XXX,XXX was portion forgiven in the our the debt, as SBA part level million, of of PPP becoming of lowest XXXX, end third related XXXX $XX,XXX of that an to loan XXXX. the as which includes down forgiveness, the CARES loan Long-term to $X.X Act. We a company was mentioned, current additional just also and loan equipment I

final due We payment July the $XXX,XXX of to in Rock have Hard XXXX. and principal this of in October payments year

on million $X.X year. next got on year half will sheet middle it installment of fourth of of quarter have this that of the we paid balance be the last in and XX/XX/XX, the get as So will

That of one options, more year. transaction the Now, end includes on Xth of three end one the a the leaseback XXth and the at repurchase XXth one little the of end year, year transaction. the detail at the at sale

as setting which million And payments. to up obligation, financial lease related minimum that $X.X so the we a accounted is for future

calendar a million of XX, negative obligation million transaction as lease, end our long-term. a September long-term $X.X a improved is XX-year $X of This XXXX that working of the at financial So, capital to of working approximately million $X.X at the liquidity $X.X capital not considered positive million with XXXX. of is significantly considered the end term, year a from debt and

building see are sheet in a strengthened significant pleased working debt our in and cash our can how with levels decrease in with measurably you We a very and the position. balance our capital improvement significant and that has

going am I presentation back that, the to with So, to turn Troy.

Troy Meier

Thanks, Chris.

and market at the we let’s the global gas Slide our growth and opportunities, industry. are right outlook with we see in So, as the encouraged turn activity XX. we look in to now oil And disciplined very

We service are relationships this confident that we manufacturing our market. allow our line And serves will legacy into repair well. it third-party, as to And our know as continuing service very with to well, third-party to us our growing Drill-N-Ream penetration in activity are this also improvement product our further our customers. want get channel well, partner I our everybody customers, strengthen our of

pleased really with partners. domestic are We channel our

You a us them. about have They heard done talk phenomenal job. have

to for all Baker and them strengthen Our as time. do more continues Hughes more products relationship with the we

So what by we we for encouraged see are XXXX. are we and excited

gas If that you at in ISO the and talk the we we talk to about diversification, certifications the when we talk technology an company. look understand what that oil everybody are got about and that, want for and all and – we want we I understand That’s to we I do. putting have are about everybody that things service we that AS

it is dips, have effect diversification horrible past. marketplace, have this we are the get these these negative company going Our so model our dips to common into in the they just like that when they had on in make don’t

So inventors. technology we service are provider an oil doubt, make and and no gas

we where are. that’s So

we – are the throughout international market. still are MSAs We getting

country, It’s for as signing deployment it’s – it’s the tool the another new that. Every into, good service the are all for good with, country a that and East. process. every go we East, a we’re Mid MSA. we Mid providers we new It’s getting contract. we Even the more tool you’ve introduce We’re a that country time and X in country at got it’s our with a currently MSAs agreement not is same

have matter that’s As a we his and fact, of a now, gentleman focus.

get now. companies tool help contracts but this MSAs We’ve in these the to in get tools to that’s a until what going deploy of and lot that’s Drill-N-Ream basis, getting global these with for hole. really a doing these on We’re in place request place, cannot going we got we’re

always about in is because we’re ready us ever what better feel strengthen we’re XXXX, you’re do And move as we excited about as hope going this as enthused very forward we shape have a we we’re are going a to to now So in than this forward. a company, we been company. to that that year and

So said, I’m over with to Q&A. turn that the going the it to being to Back operator.

Operator

Ryan proceed comes question first the question. from of [ph] Please with your Our Instructions] Colliers. [Operator line Dick you. Thank with

Unidentified Analyst

you. Thank

really this the the So maybe Troy, pipeline other just And you looking or through far like? year of would can you at is the active order kind trends and drove those? near-term near-term what so the late What February. it still Is in describe – pretty talk the, let’s opportunity? say, how looks

Troy Meier

Yes.

active. opportunities near-term the are So very

for that what is One is larger fleet the built that of fleet that fact channel the that our fleet was age the has, drives that currently getting of orders these at, things though even partner than count old. a the rig lot we’re

that thought have and these – you us different cross customers of the threads fleet. talking the new have When a connections. tensile come threads. you fleet, replenish have as to run in strength and out, to tools their have fleet like we not new as so connections, start we pin higher our have And of have threaded holders. are that we’re allows types of we And those turning These And don’t box that end over operators lot and spreads, threads, they to tools. it also

up we making end So tools. them new

when we the got run We also what’s for Mid the tools and our are about So tools inch X-inch and we that in back anymore. Mid talked XXXX, fleet. and in offering. increase of – the offering quarter becoming reentries that’s size in XX-inch here We’ve was tools tool helping are that We’ve for when got got drill of well, the Ukraine the DNR, And the see earlier and product DNR XXXX, the that tools our driving in mind X-inch North East our – out that look at in tools. And and broke We’ve our it us going series you popular. we tool that’s about into We’ve we new keep tool. with that manufacturing. rent you scope majority how talking not a are XX-inch lateral and the case tools – Dakota, – very, in sizes the cut X got windows very down. East our are to operators we not it

line, really a you it’s as we’ve And it’s It’s not X-inch XX. anymore. look us when So and expanded given DNR It’s X, product it’s of opportunity. the offering XX. the lot X. X, it’s and those X. – sizes, at It’s it’s It’s more just

what’s what seeing. that’s you’re So most driving of

Unidentified Analyst

Okay.

grow both? will that say XXXX, or you through international be As domestic,

Troy Meier

at going And ever that the with need be tech sales since to basis we It’s stuff – that’s a a had domestically, and structure also our XXXX, we’ve tremendous both. for we channel this We We’ve a Drill-N-Ream in partners company. marketing on a opportunity this but understand look global company haven’t handed been massive. here never off. is

So market. process on us, growth amount new tools international step And something model basis. is And these a is the it’s it. be me, we’ve learn – but the the learned still going believe there company in of international, as we’ve had deliver of for way we for to tremendous but here is opportunity an to our the think domestic we every big

Unidentified Analyst

can there Okay. of the not off through do to or flexibility that as up cash Hard half push maybe first are options out With that or well? coming generated Rock pay July, in think you that, you with year the

Troy Meier

to have but with pay off it soon generated, We’re we options. cash

it. on flexibility some We have

something to but of, on have mean, and focused it, we out it. there. got we’ve take It’s care some it’s options. we’re I So, see We

Unidentified Analyst

contributing? of gas see and revenue streams some the outside we When Okay. oil of could

Troy Meier

Dick, I on count throughout much XXXX. it wouldn’t contributing

We’re – third-party we’re of started is of very looking and we down end the going selective. outside being oil this competitive. At of as gas – the incredibly XXXX, machining diversification is

So tooling bids we’re that we fit we’re repeatable but and the that work. looking one, also those fit that have, entertaining equipment our for

programming somebody to sends all it’s one us buy – go and And off. this design So that time made, a tooling need of post-processing every prototype. just widget not the a we through and they make not stage it’s and

but pool. of – for looking us that work really the these reduces We’re size bidder that fits have, companies that we’re give also entertaining can we complicated machines that it’s

we a that in a within team been doing here so those bringing in, job we companies good put And truly understanding when place really are we’ve costs scrap apart. Superior is what on

We done a made getting and has just side of controller things. team hire accounting have a the there the got – as in we job in knowledge well base phenomenal that phenomenal We the Chris with need. there

we’re margins areas building like tight. the willing team. we used we’re in on where for other arena into stingy we to being So take We’ve are where oil was doing we now gas. we’re man, identifying that in got to, in incredibly allude as in margins talks to the we’re to people, been work And But we started closer have that the starting look third-party and what what out processes is of QX and in went the place. can to really because make I ‘XX,

Unidentified Analyst

right. order appreciate trends. Congratulations then. the Okay, I on recent

Troy Meier

Thank you.

Operator

of proceed question. Advisors. comes with Bair Please next Wealth Ascend John from your the line Our with question

John Bair

Troy morning, Good you. doing? Chris. How you and Thanks are

Troy Meier

well, John. Doing

Chris Cashion

Doing well.

John Bair

on, on was sorry, the hang – speaker. I okay, Is that

and federal And those have federal or exposure be administration that I those area, just lines, is in big extended, Mexico companies to impacted to and Waters? whether and am do and I that companies were know much been Gulf that not the but... have oil if also you exposure, it offshore along and not to place. might that or this same operations gas companies leasing Federal base much you existing that’s a operating if the curious historically, of put current in Okay. acreage, has be customer have if exposure moratorium your

Troy Meier

that one look we the here, market our product when U.S., customer. because – have customer there domestic in So the we’re delivers of we that’s where the the step that base, to the channel removed partner at in

However, at when of we the is look majority Oklahoma. customer base, that work Texas,

I I we leases look state are into of getting compared be do rush of late It’s ground. I seeing ground. that companies – federal a that I right state the were think Texas are QX, – we’re you are that is seeing like, the if QX. could Texas most acreage. Utah. at but what in in federal and and on now, is call those to wrong, drilled think Utah they lot fee believe and ground most what Are some of

Oklahoma, the that lose can’t very that, So coming don’t the activity hear I some much that’s they do from we’re of believe seeing. But work that of knowing of Texas that I work. lease. amount that, that’s that’s and

up, that New that got I Mexico, ground to drilling there a – we wasn’t federal see. at see anyway. there. there, I I’m you rigs hoping being which impact that the federal wrong on look if at there that as to drilling look because that Permian, But I you is us. some have would the federal drilled there don’t I’m standing with that’s actually I goes I imagine grounds down here don’t when is drilling associated pending on Mexico, going not New probably some am, And great on Utah, much in are like think major

the tribe on non-drilling deterrent quite federal from around got ground. issue, the that I’m ground. of drilling that not do in got we’ve is on rigs tribal but they seen The X that on I how now a X from we’ve here got federal sure release Utah, excluded or federal but that of were think stuff up, know some I ground. standing on they

probably seeing activity up some why here of state. the that’s pick the we’re So in

John Bair

perhaps, federal perhaps of that pick – up it hope acreage think areas activity this. to there where Appalachians if there. lot But other I in and that could not a I senses their I about up the in Well, if up like the come is mean, Right. doesn’t, imagine I would would

So...

Troy Meier

of oil gas, Correct. to – we’re a going going it or here to it. need lot we but get on we’re we’re market either going to get it international we’re get domestic, to And and an and going

So on to and international it. the where we in that’s and – again, the I believe offshore we is of Gulf, I the But strengthening performance. That’s our performance to important. out you why question at do And know some had run in I be good definitely Drill-N-Ream answer regards tools of get had send our Gulf, find platform partner can to Gulf look tools how that’s out, it and the that they do back them and your how we in many able channel we’ve have very those runs on to the that. to send

John Bair

Okay.

Troy Meier

was but won’t say that. say, around, I I circle going to

John Bair

yes. Yes,

right. Okay,

orders Okay. your demand you in Also on impacted other perhaps pick or expenses do flow in you overhead you up that. your hopefully see wondering, are by products will can hopefully, to to are you – you come words, check as ramping feel to just going much [indiscernible] starting flow – up, trying for pretty In bottom be your line? that keep to you’re confident to – that pretty

Troy Meier

key. is Volume

We’ve And through go been had hire able talent back We that midway to those able we’ve to year. last have back. very fixed hire to let people some good here. costs very, been we

volume. our when to people of everything start do, place we in As absorb the that us, is margins really more can we nice. – now start look volume getting have to And we amount and volume

this So ton adding company we I grow think a of can without cost.

some have to going We’re expense. international

in We the have international market. a to repair get facility

end to a because some may travel pushed budgeted too we’ve still that we’re So we get that. We have the done a had center not the It little with to future. is back distant bit are look going restrictions that over East going there, XQ. individuals option goal we for fabrication be by a as a deal Mid trying of on there train to in in and repair to the but

John Bair

luck it. after Okay. forward. Well, very Good good. Keep

Troy Meier

Thank will. We you.

John Bair

Alright.

take You care.

Operator

further closing are queue. questions There hand I’d for back management like no to in call the to the remarks.

Troy Meier

joining And for a lot on going us. here. thanks got Everybody, we’ve

positive about it’s and and got front in opportunities the optimistic team. going in be beyond, think I of We’ve really XXXX to feel very and I us. the

So Thank we’ll get we’ll to you. tell tuned, day. We’ll I keep it have With right. get that, right. a and pounding get away, the everybody, this and down road. stay We’ll good want

Operator

you and conclude teleconference. gentlemen, participation. Thank this your Ladies for today’s does

lines time, wonderful You and may have disconnect your a at this day.

Superior Drilling Products (SDPI) 11 Mar 212020 Q4 Earnings call transcript