SDPI - Earnings call transcript Q2 2021 | Superior Drilling Products Inc

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Operator

Greetings! And welcome to the Superior Drilling Products, Incorporated Second Quarter 2021 Financial Results. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure Superior your Drilling. my Investor Deborah now for Relations is to host, introduce Pawlowski, It

Deborah Pawlowski

Superior have what Thank certainly Troy Cashion, today in our appreciate Victor, Meier, your Products. you, and CEO; Officer. time and hello our Chairman Chief your and the Financial me on their with talk we second everyone. quarter market results and and a We Drilling and call I Then bit open Chris our conditions interest Troy seeing we Chris of the questions. are discussing and will here today. call prepared remarks go the little through about will XXXX for

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

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

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

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

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

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

Troy's if would I to him see name, Troy. So slide three, will with that, begin. turn and let you you will

Troy Meier

for you. joining Thanks Deb. us. everyone Thank Thanks

some the it's time here when how a there a There's blades, that you and we've PDC that market the has we we drill doing bits, product have is REMA exciting activity conference relying skill XXXX team long refurbishment, more braze America at Superior, it to at that XX% a all is we here, be see it’s very on the the product, more about our PDC North at if them people what lot quality the demand – for business driving business it's drives providing on As we what we look refurbishment. busy. look do, opportunities that stuff and are and about to and so good second PDC a exciting them into we we when the we have PDCs for brazed exciting at every America call, manage that very look quarter been that of here When going we braze we this talking spurt, about when third up set talk to North growth Superior. DNR, And when we're go the into growth we see you you us what's into does unit business strong, been talking very strong going can it Superior. whether as take produce also high machining, at at refurbishment some everything and when for our we the party it's that's and our be braze that that certain into at

team time And PDC here understanding refurbishment. we tooling the relying end more brag our at they as that know developed These us are North the America, Machine over provide It's and things. need, they've of does DNR brag demand. in running down Shop, tooling – our some to operators our more DNR machines, manufacturing about, these on somewhere tool feet. The the talk go them are X,XXX CAD straight we another about was operators to allowing, Drill-N-Ream you longevity that our feet, again, very larger the machining here just bend Drill-N-Ream where drilling that's reasons types to out and the opportunities able the on in do our tool by we team for and also X,XXX of finding wellbore If they machines people that to at were come I’d you on it's got and services back things. They about they produce. that side you had a positions. business, because there running companies what we the When they look those we of of that talk we with third bend left, talking their take help to were do. talked they on tools, their that financial could lot out a down their good are of and the figuring with staff to asked increased it part Drill-N-Ream people to help through Drill-N-Ream, out there, the files on. to that profile to things our are look files There's great them convert driving go they to high go their unique the drilling wellbore are able we've operator few business them create acreage wonderful as of we'll were we make When they only curve X,XXX and drill the why have qualities about party goes more feet, cuts, people – ago brag go a more like also able about a we left, I with after again to another in go when are on – feet, from side team. some weeks them to of customers a an us BHAs. X,XXX but X,XXX are like to more with out that lateral, And a those are good unique programming out future that be running machines, match these in of go drawings and here that's activity the a very of were is that should well, to also helps

that's time is all you that at X,XXX do a lateral made would went the changing totally that We get on opportunities shaped think a that acreage and foot going here. been be look evaluation U drilling So of well have it This to going international to could incredible a to and we're new what see in at some they perfection, team really point there. process It's one I advanced and in basins. did. in of and these growth

XX%. Our international increased revenue

or As and over you still still we've issues very activity look it's is Mid-East that talked at moving the hit in about out all lockdowns in where and and that know, you the COVID Oman are place. Kuwait, happening know restricted. you there When all countries is currently like people of our international

customers team going bring So new on done markets. that the on some breaking our still bring that about high in stuff very profile future some we'll to customers. on team And up exciting We've with that well was into able again, that, revenue, those has got opportunities. increase talk

got about, the just business we're QX started. to you the We've that has stuff look and here at all that in see happened when to So to but to Chris Chris. of financials turn in talks staff it said, the that over you'll getting back some Chris. this in opportunity. back going get lots that drill With good I'm being business and trained place,

Chris Cashion

everyone. you thank Troy, Okay, and welcome

that where Let's continue turning talking slide revenue six, to an our provide increase Troy about. by we was of that review overview

we see that in QX, have more XXXX. You in than our doubled revenue QX, doubled

revenue. Troy increases we've sales, product royalty all services as drilling tool our repair higher increases contract and well So fees, in drilling as higher in and mentioned; as seen lines of

we're pleased of improving about lines all that. and business So really

are We quarter XX% of XX% last XXXX XXX of first point rig was from quarter U.S. an That count low we increase with rigs. an count the average up in year's benefiting from average. the as third increase quarter an and from rig ended of

efforts Additionally, when able that well that. shaped we're seeing operators to of the you and support those Drill-N-Ream do; absolutely about to one of they improve enabled U amazing technologies the were heard rig what efficiencies and higher drilled. the its given demand Pretty you think that the for describe that Drill-N-Ream, Troy was

have penetration and markets last quarters Troy in we continue in QX. of as year, the count are are far that we'll we we've international U.S.; increased XX% the Overall, has to seeing however, the recovery that We now and this lagged and the Middle as the of support the pace was average our rig XX% revenue strategy continue East. the so average The and up gain seen that quarterly half year-over-year international second growth XXX two for the traction with developments was The our this year. recovery positive Drill-N-Ream in sequentially. at international a steady mentioned, optimistic

partner America, into as to and in So from increase lines with make year and companies as well further our some continue We not market going benefit later only activity, service but oilfield the development to believe North product internationally this we we're XXXX. as in product strong efforts increased revenue. good global new inroads

products XX% rental actions seven. long as take it we to up conditions with revenue, XXXX, $XXX,XXX demand work. revenue as well to also included the sequentially. and and in services, turn took on align and increasing maintenance in revenue our includes America. slide rig With in the related market contract and a roughly demonstrates as cost the international is count Drill-N-Ream operations aggressive legacy upgraded fees, the the term up look North sales item or in an This for Drill-N-Ream $XXX,XXX tools American at reflecting our for The services line fleet that as Other higher expands with was Middle steady this again revenue both North customer. seven reduce deeper of little been to expansion or demand. are the the have and and for improvement in it’s PDC strengthening XX% replacement revenue we Tool North sequentially, royalties, let's East. the refurbishment The manufactured tool contract Tool repair Now From lower in reflects market renting slide sales tool which company America. tools. a increase

low costs the was see can with you on three on balancing slides cost keeping our October our phase eight see and phase are You nine. in and eight, and results slide of reduction discipline completed maintaining by as The overhead year, of can demand. cost that last higher program last we

have demand. been personnel with support re-staffing labor and to current direct We expected

Now, XXXX I should of note back QX unusual for the to that shipments included cost an in U.S. repair. of revenue of tools international number

leased facility East be related were expenses now Drill-N-Ream in in the preparing to down second total, We the and the expenses sequentially, reflecting have this a operating to reduction and Middle timing year. X% close In largely in of amortization the the quarter region later year-end expect expense.

control our and As in we demand in operating quarter. $XXX,XXX cost the the efforts a generated higher market, the income result of given of

an operating to $X almost XXXX. million QX compares this loss in Now of

$X over QX. of million income little of XXXX; in loss operating an operating QX, in $XXX,XXX So

at slide pleased X, on business. this volume quarter. clearly significantly. leverage can our line we turned strong and net adjusted both in We This when are our improves this how the higher EBITDA, in on which demonstrates the look it with see business And we have really further has we bottom

quarter For loss the was breakeven. net nearly

and Adjusted operational measure was was that reconciliation QX, a of nearly $X non-GAAP. revenue. QX the in in slide performance on nearly XXXX to million. this describes at QX. As measurement breakeven from QX, to negative is see $X.X supplemental just higher the table the substantially million, Please at presentation XX.X% you used we $X.X that almost GAAP last back back chart, It non-GAAP of see just million can in breakeven look negative quarter, EBITDA deck

principal the debt, September end during of to including balance go which quarter XX our $XXX,XXX In $XXX,XXX operations of sheet, XX our let's at has leaves term more a not to up with $X lower and final it Long period, just payment, the at balance of was to of a we of run our year-to-date roughly from end, last next strengthened last with we levels. is The building Now company from working October which cash the the paid the $XXX,XXX subsequent That what XXXX. balance the and slightly end cash XXXX debt generated slide to $X.X in hard up the portion was current end payment where note. $XXX,XXX payment, due highlight year. July, slightly at due the and capital million the double cash million, until of on was one revolver. in the higher us quarter

lease As obligation term it while is balance a reminder, property, on financial on long a our as long liability debt, Utah as sheet. a classified noted not our our Vernal, term is

I'm that, with turn back up outlook So with wrap going presentation review and of Troy to the a to to opportunities. our Troy.

Troy Meier

Chris. Thanks

on the that year count count come look and a forward obvious continued weeks the that growth be we're five we believe of that now. at the market looking facility the are improvements look products continued that today. growth and that the three, to-date end that – be going rig being orders at see hole the is four It's couple seeing with or have North growth placed we ordered in We a with we we'll that So supporting American right we're up and know as we will rig that rig our in in that believe market, going will are weekly. the will a being for from machining

continue to demand. to the going we're to So meet gear-up

demand there, more that and we tremendous us have large so. up even high very growth have right a work are managed do We're here even that facility. pick the our We putting need get to When that that the a more opportunities out. serve-cos sure than doing look them on up we're and now asked it support at the we out making in and happy we to to people we're more keep quality

we our out So done build increase finding the the the it's wanting and to to we're are see multiple volume more we've and really exciting us. do, companies as shifts team to volume more give

this look international, growth. see to manageable neat development. We good we it's really still, as steady it's So a at the

are ready getting Our management understanding it's they We've customers hole identified we our in market. domestic the from coming also there's managing the tool them on team a inquiries some will that there growth excited and going performance be job. Arabia Saudi well is lot of we'll on are to in customers are that – that going part it's growth the those customers money test of and these QX. the about very saving wonderful series and large large doing be are where and a and here we're value again, managed the of time fantastic as in tools bore We're first they and Drill-N-Ream the the getting Drill-N-Ream finishing up and

were feedback So countries on large that. We that in and Oman like good some we're know series bore Kuwait. for the looking

serve-cos with moving structure with expect out to good effectively, but and price global for I'm work them extremely in much also our we on charging some with their is countries So understanding good don't a and working We see those tools. all an large we'll We're to on that logistics. of there, companies know some anticipating we to agreements more have different help leaning allow and small tools logistics that and and feedback company team. performance some be every services we're us the country us on

to stepping say we functions do customers to can some role, no and to haven’t been else lines. got in us very of that we it to customers, we turnkey that serve-cos for looking opportunities from There's product then very here that and up our these at that very to some look well product somewhere their support send step really reason look We're body who we as direction entire well guidance tools our do and in while places that with We also send have customers of larger very, legacy that for and our people here. lines. the we've been. just we're support a within logistics as We working we we that them machine perform have for adopting know these at happy but are to some out well, get and we efforts

cell, we're and So to cell and our to have this is set that line desperately what and customers up turnkey to an timely, will we pieces think the and or those these done manufacturing to our we're very customer base think raw adoption turn can enhance respond to getting take their an well. need outside identified calling we efficient, we our going that in products come that for from cells audience in normal still product think so very it's as you a if products top revenue, line to we product we finished of very that base it's these products

to So but still international domestic, have on got a We and year, – we that growth, very COVID positive going we outlook. the down doesn't growth any there We're look throughout managed. continued does. development our slow hoping forward the we're very strong it got very we've everybody as eye very but on well

think to to over said, I for going strong it's Q&A. it a year that And to being us. going continue with back I'm for turn be good

Operator

first question. Please Advisors. with proceed Ascend your John [Operator Wealth comes from with Instructions] Our Bair question

John Bair

sharp rebound to well out yourself bear you've that. didn't Thanks. Troy afternoon glad in see do I starting know Chris results, to of a and positive Good seems positioned congrats but and it, this for it pretty some it and quarter.

Troy Meier

Thank you John.

Chris Cashion

Thank Oh! you.

John Bair

wondering that the off on privately are listing of and seeing status from question. your some up of opposed on, is adoption I've the rig of coming it major one integrated independent of tools if companies by the questions, I'm a picking operators, that's as given one counts the of and pretty been couple seen a from you meeting requirements, been pickup listing Got And continued players those what curious but A owned and to of this simple, is first big second lot reading. independents?

Troy Meier

Sure.

So if your second will. question you first

ahead our are better are that reference a E&P and companies as They company effectively. value that. seeing realize the first use question, strong especially a go We picking and independents it your when seeing E&P well large company large can very Drill-N-Ream the answer tools. a that cell you these if drilling on up Chris, point, and is with But makes

John Bair

you Are that seeing customers new then in world?

Troy Meier

Yes, are. we We are.

John Bair

total meaningful or… a volume of it Is percentage then your

Troy Meier

at the you coming coming going we're seeing on know what do one rigs and these efficiently that's time – runs know have Drill-N-Ream that Well, have as get rig, of is you on the big wells, you the see companies they rigs, on and especially But these every look drilling the as know if you E&P’s, it we meaningful. the is new we majority it rig could They they so yes, meaningful. got of we right? running it So mean one and own you majority as someone new know. are a month, multiple these two

John Bair

good, Good, okay.

Chris Cashion

initiative, last update Yeah listing submitted was the John, toward accepted was as QX The in was plan. and we're accepted back to updates the to update provide continued how the we NYSE NYSE. plan and it The provided plan. we May, plan the the quarterly by a that to NYSE regarding tracking is of part

update our plan that so August, this XX good. tracking so so to QX providing Monday, we'll and be We are coming positive far

John Bair

versus there other these a couple on, one doing is initially – more in are first the shaped of one being whatever, I'm U a great. they kind One are sure for quick or significant it's if is design? Okay, straight a cautious a how required difference when questions. time they lateral? time additional these little but perhaps, mean, then drilling I companies much of And

Troy Meier

in it know, question. yes, see don't market later let's our know back out, the the this can a what You if find answer honestly hear calls we It's that and to your do all top casing then rates, to they – to goes willing that good they be on important I bends bounced part, very bet that off was the excitement in footage I'd drilling line touch. did probably chasing does these footage take and weeks no curves. are they they're bottom especially But guys with I is degrees that's these the to the with the the think of really there. that a thing, very XX efficient, would it drilling that and to be do that right teams team the and issues drilled had, long a runs have you just are to It they bottom right take wasn't big five, days. and ago NP are where [ph] with well six being those very curves They couple drilled some about it rates they that curve time. These a good now a was used in curves deal are hours every notch and

that So efficient up you a it they very company, extra and drill of think was win it really X,XXX foot well, foot further well. that that, acre being time a being That spacing, out X.Xx – able a was know book out to I production XX,XXX more are that fact for being ends to of especially the spacing. instead good that of probably

John Bair

your coming along? critical One for you are with one, new demand how Great! quick tools are and materials last positioned as

Troy Meier

since We we ahead our find I'm what that's glad prices that looked and at up steel we gone have we March – you as it, know steel Xx, had looked so the would will that point year ordering like. been steel this through where us thought at we now to We've year. of the a we're the we're be carry end there and

which is been our we big things purchased, our that we the as and able even support purchase build fleet steel. as need customers we been that and them need goes, help one some to build and – steel main able to of far fleet I we've purchasing the think serve-cos far So

and on been there's as the because put you don't job. hard that little as know diamonds now, really that So in as we we that hurry a the us feel quite tools. for there, what tremendous has, so marketplace good a tools our out group alternatives stuff purchase the in done in we how demand everybody and this and get and good the they've we we've our we We steel sometimes cheaper customers cutters, have involved as nervous on has some got a the give is there for hit quality

high pressure we put in been that that But seem were the stepping manufacturers us and but came we on we through nervous, feel our are a end two we So and to up. get that cutters there's little using in or so that bind. a don't be spreading we they time got well vendors a very out,

John Bair

Great! those out get Thank for you forward. luck good somebody of else for I'll taking questions. the way going and

Troy Meier

John. Thanks Hey!

John Bair

Yup. Take care.

Operator

Ryan [Operator Instructions] Dick Our with Thank from question next Colliers. you. comes

Dick Ryan

really you. Thank about, talked an operator going using the DNR more you The couple forward and configuration transfer get American is them is effort to for customers that doesn't a front. that had reference North potential that in other point sort that the Troy, the of you or on past, Hey a that been to that can to that alluded of yours? proprietary is

Troy Meier

No.

that a few unheard can acreage these understanding be ago start and go was they looking little years something that they different like will everybody that that may and about really at bit come geometries think has out it news already complex and that some. the down position are done team that well good make have I you I is But at fine, and special they a and believe talked and to what this the will do, their of. a group do and

to of and thought do their team are wouldn't that. teams shared, You their can they think and lot willing so in them. relook be But place are this very there what and will the and I activity you out to some do I prove and like for is for today, they is are on that will it think this winners let acreage have doing positions that wells going believe do, of demand complex these they there got They know smart; go technology people these shaped create happened incredible. good something and drill they’ve has where leadership be a to even

is company this So yes, that tomorrow, spread, and drill drillers take small. oil Directional it'll they best today them. practices patch for the they their and take very with company

to going this exciting to develops. it's how see be So,

Dick Ryan

market that penetration, that Okay, sources? greater you’re or telling on other is through coming DTI

Troy Meier

done They've that’s place. got a DTI They've Drill-N-Ream. team a good got job has they value there tremendous good management the that done has a DTI. They're and a in customers the organization have. their good to good No, done that a a appreciate they with job, really them they've down team job. great and bring

Dick Ryan

million, $XX year were of talking think minus the on an upper growth $XX basis? track XX% with year comment then the you million. or revenue range. projections at I XXXX the you forward looking looking plus I'm ‘XX. and guidance, be rate, digit, comments on which million, back not-necessarily in Are double through kind to pre-COVID, Okay. growth at mid absolute then EBITDA your release XX% the more to kind expect $XX the were per I on of then talking growth the mean your you but going that resume back that next of on end you Are in margins, back

Troy Meier

getting we declined there got to that first we is, need have it's we have, the we one get support are here, really is and focus when though staffed what geared Coiled growth – after, now to right now support But But there on and have customers mean, we're some today it. even more in large the to well. the a very now have was the more there I We've It'll Strider we we staff to know you at is look we this the Yes, audience. we We'll have tool, good we know to as our put going that all pace the and we you declining, XXXX, had have last proper are now not it's that we're there. quarter We Mid-East. time what the wonderful in bring knew Strider and had a able had when able the have XXXX. to could that now. say rig shelf, out it we back be and count tool we good got legacy a group doing we we is start the that to on to to going did the – right through right capture to what be up, to Tubing right out. of got some our We're go were now if work be trained opportunity out, company been of down. companies and year, that on things that Stride tool back back opportunities Strider was take that on that more customers people got – bringing we on and but things of we've this going And when out slowed we've

we do What tackle. managing else? there's this feel up a tool opportunities got we've growth as when prove respond out We grow that is we go when getting our we and and this we we our customers legacy look in But supporting that to tackle?’ to fleet we and good know going we're prove we our were with that look track, in and through you we're there, what a there fleet us. – for knew lot get be as as and there spend we to front path. ‘okay, to opportunities a and would making has And on back that we this, that our else that to we don't year, that we they if the to where all is out, year, know very set So their talk of back about we us Baker adoption. maintenance tools, that's for feel slip felt support And with what know line inventory the also how path need what had growth do to on tools. supporting going going knew there, well Hughes and we sure growth and DTI we're product we the go they're very could also back market and to that think we of out We're Mid-East on we maintenance could the program at if going building on we get at asking that

And and we look keep – so going to demand very bring those services. and for be we're to going margins at us to we're where tools that selective us going high are bring our and good

Dick Ryan

you. great. Okay, Thank

Troy Meier

Thank welcome. You're you.

Operator

for any remarks. no over are like time. Thank to Troy at turn back you. the There questions closing Meier this I'd floor to further

Troy Meier

again thanks joining everybody for And us.

going you we've a the of to see, forward. As lot can continue going opportunity We're got pace.

doing a like continued and We everybody to you got able coming good that increased excited products great year, this I great on to just we thank I'm have a want that's going new you When and has look, given on challenges supply. throughout good being remainder to With keep that does. mentioned job us. know growth the very that we're team I for for that we're here I a and of be times we've forward to joining roll exciting staff said, believe the everybody market steel you as us. challenges believe this It's strong looking XXXX. and into

Operator

this Ladies today's concludes and webcast. gentlemen,

at great now Thank may have disconnect day! You your time. and for a your lines you this participation

Superior Drilling Products (SDPI) 13 Aug 212021 Q2 Earnings call transcript