SDPI - Earnings call transcript Q4 2021 | Superior Drilling Products Inc

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Operator

Greetings. Welcome to the Superior Drilling Products, Inc. Fourth Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Instructions]. [Operator that being note conference this please recorded. is And conference your host, will now Mychajluk. to the turn I Craig over Thank you.

You may begin.

Craig Mychajluk

us certainly Yes, to thanks, Chairman Financial you and We our Chris Meier, Officer. our everyone, have joining appreciate Chief fourth quarter CEO; me Dan. XXXX earnings our And Troy today. I welcome, Cashion, joining and call.

You before the released results that should were have a copy of this financial morning. the market

that slides will our the have also should You conversation accompany today.

our website both not, you on be If sdpi.com. can at found do

Turning Exchange by out the also well that These to stated non-GAAP be documents uncertainties differ evaluating with risks statements the could to uncertainties events at which point are today's the make we'll our what and slides well measures, here from and website point out our today. want provided materially other session. These risks future as Slide X. that formal cause I'll as that actual sec.gov. we'll some performance. discuss forward-looking to factors and and call, is are will statements These during financial earnings Q&A we the or I in useful to as the company release, results believe found on during Commission. also apply filed that to in as subject discussion during documents the Securities some be can other

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

the Slide to over I'll With I'll Troy comparable it begin. We as earnings in as the deck. have measures to Troy? tables that, GAAP in the with to release turn X, non-GAAP it of accompanying well turn and provided reconciliations slide

Troy Meier

everyone, for call. us Thanks, Craig, today's and for thanks, joining

talking on strong X, execution. about with start into off get and You're it right Slide let's

tell been When coming at what really, place some our strengthened look our last been we bring to emphasize really tremendous one at convinced and in shown team what talent some our the into teams really all our done. of half strengthening go look you department. company, every When and the as you we've think we've foundation that back to we've that them really of in forward second as at with team. our talked together look of the able year really We've has and to they've we HR here, things is like we that And look into strengthened in Utah XXXX, hired to a benefits to able programs foundation. at the it things you management wonderful here the well. talent job I'd the We've fact of fabrication to rural and of have spent they've As they've fabulous really been the I put offer. really, and and strengthened world-class bring really XXXX I'm world-class put forward people beyond, -- a like group in managers. looking fabricators. side with some bringing I'd They've into

there, market at Looking management quality the a do takes. time They've as members our be processes They've look in to been as that what fantastic our lag team tested has a partner new as at look far job team structure bring we at you that design, done on. and really get them and penetrating customers our the channel certification qualify a the not and a build to They that business, to we local have we do of can locally -- to system. bring to there, the send new they've market. done here Drill-N-Ream get on that, DTI, program here continue TQM, we total a place job. testing testing to sample management and coupons our university that fabulous tools in able parts quality a and the real with and other into there, to quality job flagship done the a turning it the When good -- out product, country working so

the seeing things go Some to of starting there that California, is tools we're -- see go to that we're to Alaska.

doing they're a and existing base. good their job, customer So selling into deeper they're

look activity, And doing to strengthen good continue PDC. we talk they're turnkey now it's job, processes to We on just a not we find take relationship. for at -- on we you new that our with that's PDC that and appreciate lines. customer. product So have going refurbishment about We When ways PDC. our legacy that when

our building to we we this -- identify a bit have at we've talk and start we we're a turnkey about looking more talk -- the get opportunity, customers' repairing. down products we've forward. able can here has also that looking diamond we'll and about within we as to we'll that at little that and a And PDC good then product lines and operations, cutter, an into slides, We when been cutter get very anything

As position. strong cash the noticed, you

I'm the he We But future so continue today the to numbers we But opportunities. our over time to go with Chris? I you, on to then up back strengthen can we want over to opportunities. Chris, time a as about as we'll turn catch spend balance little going and forward, go sheet. more talk

Chris Cashion

Okay. everyone. Thank welcome, and Troy, you,

and up where our to Slide the increased XX% year-over-year. of an growth revenue X, provide Now for year. please turn sequentially $X revenue overview impressive QX XXXX XXX% very we to million,

repairs America bit tool royalty higher growth North fee demand, drilling and market refurbishment tool and robust Our in demand. to see continues

revenue increasing in in XX% year orders $XX.X due North for and Drill-N-Ream production to a XXXX, to For our tool, the America. oil increased million full gas recovery and significant

XX of average up in XXX rigs fourth from ramps oil production ended count and benefiting up rigs last an from up, year. increasing third rig As count. quarter the an rigs, We quarter with the the from we're U.S. XXX rig and of gas the quarter average of XXXX

We at well the a we continue go America, throughout North with our continue impacting pace XXXX, headwinds into various improvement, that as industry. will confident to XXXX, particularly deal even steady and through as be seen in global we've

On by pandemic revenue consistent, it's side, somewhat Despite and offset of East international in the XX% fourth international the revenues, containment loss now represent Middle roughly XX% restrictions. year COVID-driven dampened fourth which XXXX our remains revenue, North a the increased been though increase pressure, The quarter American by full revenue. the revenue year's still from quarter. total XX% in was last for about

Services quarter customer. was $X X million. our for Contract up long-term revenue improvement fourth and revenue. period for on move let's volume review XX% XX% year, legacy and $X.X product The XXXX the reflects Services our Services to the Now Slide up Contract and refurbishment manufacturing to the million, for roughly in expanded same and from and Tool Contract in

recovery repair million tool from $X.X the prior we revenue Contract year measurably propelled orders seeing a in sales increasing are enter up $X.X as million, both Full as We're we as or period, an into XXXX. is new we Tool well tool replacement revenue Services Drill-N-Ream. higher As tool royalty was by fleet mentioned, up. XX% as and the at seeing and year ramping

referred of to and are that with in we team, company's to you -- expense our we X, as and be products expenses were the and lower down a building Troy see reorganization X%, We're improve team, on growth can $XXX,XXX services. the discipline XXXX roughly to. international as our even increasing focused very demand continuing in the cost company we see primarily amortization in this Operating Now roughly investing Slide strive on for of or to profitability. business result as

Like many spoke training persist and are controls, us, these Troy control quarter. hard as efforts. efforts improve companies, And to focus of operating processes has expenses market point support the I the progress a we but in that is are forward. and and it's we Staffing validating to inflationary and are positive income further and the operating third teams to cost as These pressures us and in to move straight would continue to demand just Our generate about. and $XX,XXX are making. out this hiring working our area will elevated the higher quarterly keeping pressures be the address income allowed like for

income for loss the in and X, that see bottom Slide can -- on year XXXX EBITDA was our or prior the net to per year. adjusted share a share net our $X.XX results QX Quarterly you and line full period. income per Now considerably of $XXX,XXX $X.XX in compared improved of or have $XXX,XXX

turnaround million For the is year, of the XXXX. million reported operating of bottom up and XX% year to of full increase significantly million up or with to $X.X calendar turnaround from roughly This close revenue $XXX,XXX, breakeven $XXX,XXX in for which continues $X And That's line XXXX, strong a performance of QX million. approximately $X.X loss $X million loss a in of a an $X.X year, roughly, demonstrate to the for EBITDA business. EBITDA. our Adjusted revenue. that's leverage a we

balance X, move highlight we our let's sheet. to Now on Slide where

$XXX,XXX October XXXX Rock continues principal our X, end debt from was of including at $X.X that roughly our at end the and $X.X payment we've we lower note, sheet the got $X.X see levels. balance provided debt, the up million. You'll for was to the as roughly portion, Cash $XXX,XXX strengthen year, And operations XXXX. to current Cash sequentially. that's on $XXX,XXX up due million, year-end more and Long-term of continue by year Hard on million. the one due the

cash actually sheet. We've debt balance cash cash to our So net -- more is got ratio negative on debt now. than our debt to net

of equity million. the and priced that in million Finally, net $X.XX, XXXX, during quarter of of company an $X.X shares approximately proceeds the to X.X fourth resulted completed offering

capital directing we into the that chain moving increasing successfully of material will a that constraints ensure customers. we demands we're to portion of We can supply delivery seeing, strategically the inconsistency and times address so our our that out inventory meet be can raw

balance requirements. like Stock I XX/XX/XX puts would equity us at York $X.X report listing New the continuing to which into our million, is book Exchange back Lastly, that

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

Troy Meier

Chris. Thanks,

year, closely the we for and we you'll we at to the structure North opportunities partner throughout partners, our as as agreements get we legacy with and I within look be was look we America So a and as with -- signed continue place. to at lot our what we on throughout of XXXX into companies. opportunity, out with. look But also come our year look XXXX pleased And go you this that those into we early all working think get were forward channel work and on more things

we've we're at within we prove countries. do it's strengthened When that able working whole going looking that complete thing not say, $X We're million an we these a our adoption, looking this we countries. it's Chris manufacturing do with really at get over It be looking is there up, center. a a over hasn't have shop our only a let call it in that machining place process. setting large got we're products. us some -- particular first as at We're how center manufacture as some and of Oman, mentioned to E&Ps We're at saying, with product opportunities, the third-party been And again. line, of being we currently and once earlier, And to at we're high-end -- and that working what product we've COVID that just look body, we'll been do the not do that's opportunity spending body. building and keen. look that We line machine some going at -- cell you that UAE, we that? we let opportunities We're Qatar, identified more us our for in with sale. helped. international look think this our complete well things line And we're process servco there. a to slow Arabia, very When that's around the up was we -- these but in on machining product doing Saudi very we that turn And like

we've going You look the got to Mid-East does, to still and an in region, there but looking The is at in Kuwait some when broke issue there count -- and there doing we're And we're area, come the there. expect forward. back the get very working to and out and that but up. place where with rig high-end that's job, wonderful get open we really E&P up team opportunities we in a it to MENA that's in into and to it's expats sell,

excited we're could there what about So happen this year.

M&A down That's at still -- to road, much we've talking We're we're going and look opportunities. talked alive. very companies. You about still that

to obviously, have doing we're a We that but pay down like ball lot what to working a and big we -- court. we're staff moving So we're the there. we that, attention of don't it

one that we're years, of about, diversification. couple So last always talking of things excited about the for the we've we've -- been

So we support electric some a engage diversifying. scale and a they manufacturing to want beat us vehicle doing -- us, support don't the very this We're in with currently, gas on a next industry, technology, helping -- We're very the on that and but in it's to and very big company design that's stuff. way. right vicious working exciting in small them now, with been oil get up downturn we're for everybody we're cycle

they feel that got some can that's this fun in business technology see. really to support as a unique And about big We've efforts the we so we're their way. has. that They've grow opportunity excited

I a We've to turns be to we how look I signed. We've finish things you'll going on all it's be working happy out. as So into got lot year been this year line us. of along it wonderful with got think right think close a rolls And for agreements. and the on. to We've XXXX, how a going be lot

I'm go turn ahead with that said, to to being it going over So Q&A. and

Operator

Instructions]. [Operator

Oppenheimer. Our John Sturges first the question comes line of from with

John Sturges

where Nice an One in have you've gentlemen. congratulations. and end My early past Hard The done of questions. made flexibility the -- payment this -- the you X the Rock. on you've is the year,

the lot You more have likely a you're one I off you books? curious early have whether the make optionality. but payment and was of left, get just to just that

Troy Meier

we at is that but We talk look here. it, that option, John, we'll it. an about evaluate

it's and machine. we've to forward, to goes going adoption $X that good and as to that at go payment spending not -- it bring product is look $X going this million that we cash. be structure million with goes line a we in, As there the be this machine down around But

watching it -- very we would you early, when that the we're that -- look possible it off could just at be So we pay on that and it's beneficial interest I pay it. wouldn't

John Sturges

Okay.

do but depending option demand. you the not obviously, So as -- have business the to on conditions well,

not domestically cautious that's production gone The the anywhere. up I other is question have and see has really Everyone is I drilling being boosted and internationally.

of rig couple comment count, if possible last term? the possible And stuff color early up near to looks, Could the too that that's geopolitical of of -- -- it fact, a easing In on you on? it's tell. weeks the of stalling going see you just the general any

Troy Meier

those out see there's with in over When in. And week. we areas MENA market, we international getting with to there are them meet we X, travel mentioned at if -- look team of in and a you I some earlier, and the times issues region, meet I we the like our mean what Kuwait, on X still difficult.

over domestically we is instances, shutdown in this in some here here. COVID, when your gas doing places There's, were had of we like workers. we're seeing from programs, X, these of comfortable X, they're have but a very that these what out expats of as in oil X, need X them retired whole When going of stuck shortage you think seeing -- and that were one, and A got for I these from expats lot well. countries months. that some there people these

these it's easy North going as there America, still out countries. think in of scene to travel not and back growing in stronger here, I starting come here an So we're and out

these think to a see going don't they're drill They're going the -- international increase wells. of it's the I personal do going able be view to that My production. to up production. you're hands people -- they're think to quick the is bring that. I I to on a markets, to not finding not don't struggle think in that large finding

when right more for going bring heavy it's to friendly really count tough on a market. So there, and the rigs. rig travel now rely They on see these expat countries. not environment just into them the it's for you And

But us looking of standing that we're rig count in, if for think there those the to lot a haven't see and is it any, most rigs look not if up because opportunity on the much, in we're you at -- just the part, I rigs rigs. you're at there. don't internationally looking up, we at So where for at but the region tremendous international globally, are going done that

companies domestic up restrictions want there just a here. QX, get the those and we're build like would about incredible. North We When feel places like way places say, got actually So the opportunities still over and an as going and They're we goes are like market, tools going at rigs companies as think one what up barrel. rig, in doesn't a get same $XXX going popping market I running. -- E&P place forward. it. lot to not up. it a They're just doing area growth. small to if late have with develop. places going early is a the it's We've fields, their coming Mid-East, in And to Saudi American a UAE, up saying QX, that going X bringing as newer to it companies identifying to should on a going going to is still countries we come standing in E&Ps lot refurb at an done develop be we've far to you over in where struggle able the have to small up facility running achieve and the inventory to that market up We've a We've in and then of bigger you're the And after what E&P anyway. small start of up. look on producing buy just companies these rigs going rigs. they're we're they'll those business, on it production fields there what fields. there, had far to the allows have by But set we've restrained pop working and real to matter on up how that got we're go something Oman. see to more that. up. as we're pick good putting all the But up of said not of got to agreement as going got up gathering that we feel I think team those keep I We share, still lot I think on we them And larger smaller, look see we've our X with have I Arabia, -- But E&P That's got the because placed will place. rigs, that

John Sturges

going back you able they're labor be to bring think the Do pool? to

Troy Meier

XXX, to XX put seeing answer to location come to really actually and that's like. But that's one You builders, it. steady, think rigs of I up to you definitely strange that people really, question, It's come but think to this pumpers, lot, this need I all It's to wells that don't the pool be which in somewhere be growth. not into a there. and go is have entice a We've think need to just looking just year-end. to slow, been there up hiring bring and a -- know deal. location rigs going we'll labor steady. back rapid -- been I you're it's what, by to back slow market, going drillers, you going they'll it's get John, going to that been not XXX, I we've be stuff But on X,XXX do rapid. they'll

John Sturges

Okay.

you referenced where you you Could were market item, to getting penetration greater The guess of other as share. XXXX are in had that make you rough a currently? sometime

Troy Meier

if I the the have technology look in, let's American drilling in is the in say, XX-plus and at look say West is the going general, domestic where you instance. on down XXs. if the And market for Texas, what areas you North share market, far market dare most on, just of as As just high drilling would the it's here we then probably percent.

John Sturges

sense it's like of the that? Right. And trend do you It on sounds line have growing. a

Troy Meier

More It out the more finding growing. what is bore. It is. the benefits are well and conditioned of people

Operator

Ryan with comes question from Colliers. next Dick Our the line of

Richard Ryan

bringing fields? from DTI Troy, Texas? Is to as on theme, customers, into DTI, you West new Or you their is about color can a Are that you getting penetration. little that us stay increasing what other hearing customers? give in talked on to more

Troy Meier

in at Oklahoma West said, It's It's smaller -- looking in now in with everywhere. It's new customers getting customers It's Sure. I up, Texas. California the what's setting some getting happening and area. like E&Ps Alaska. the

doing good they're So job. yes, a

Richard Ryan

market expands business the the you that to If your Or benefits do growth need environment you? in E&P, into still for the really of a kind is kick model? larger smaller better ones

Troy Meier

else, opportunities there, that these it's to like environment say need. to work larger know, existing and -- No, the this and items it now. when stuff in that's it and right this monitor you can it you out it just you of come at that chain you hold different look where existing of just the materials it's have plan as us. inconsistency drill that sorters don't when like new pops the okay, It you they diameter, don't streams, And on steel customers, size different for up, of and whole that all for that because And have goes into, at that ID some look a we built and supply know the there, you that can't throw with, current on in supply complications and that you and thread -- with you different when can need for see how at you we'd different in cutters require look is. or customer the good we're steel, today. that it we threads their And and may everybody much the is all then connections, because is inventories, we chain what that -- we're creates

look blanks and kind say have when. still more and we quantities that and cutters of going to so how really is different much you and and have don't And to forward a feeling sorters just these sizes of of fluxes up, different you how pop but much know and strong

Richard Ryan

Sure.

is the Is the optionality that Services that, On are you customer? that Contract that's or opportunities legacy still largely to side, some customers -- front. with Is option? move still? I that thought customers focus you larger the with on legacy to that had expanding other your an

Troy Meier

at point agreement close a option, and can getting an the well. stages very getting on very No, it's but done. time, been it working something to been another step been it's done -- It's opportunity, And but customers we this customer. -- we're it's some I working option. slow. it, as very, step we've do think think But -- we've we've And And get they move that's an have an very qualified. and final bring X, I in done X, very high-end of large things to we've that we good on haven't

Operator

Instructions]. [Operator

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

John Bair

whereas overall lot a companies sized coming pretty or owned -- independent of penetration count. this that of rig increase privately way. the little ask in rig market is Kind the rig in the from increase, majors companies I've different indicates regarding count steady their a public remained have that the question and intermediate the I'll seen statistics

I'm end -- not significantly. And to At order happens in pickup are but up that you So business replace in meaningful start rather then companies smaller your the new with is, coming could question a DUC adopting -- that activity. these that market? count Drill-N-Ream, their to maybe so dropped picking their conjunction the is wondering if point, majors and some the production, have if independent seen have given to from your see you activity only -- of the has a going

Troy Meier

was aligned John, place, that end the communication forward on channel we we'll North sure to make we programs when we to in the that user. one One those when direct of -- of lost in line basis, that If -- do do that going end program international put keep like we we'll of the a that to keep things, have we we we user. America, here that market, things here I North But who's and there's Texas. X the X are, tools communications E&Ps DTI, down got that tools really We when really -- look each at we say, when when in running see invoice rigs you well, America, new the answer and I that we look new or who customers that get when small we request. break in South or with we and that connections new new can't

access with company E&P don't or know -- me in direct who -- or that but that to they'll even don't company know on operators here communications tell the with they've to there. And you, I user. So know a I they end new have honest have new be team, small just many we how I are. come that don't got DTI a

John Bair

being of with you Yes. yes, on think significant got mind, -- meaningful split amount tools. Canada? but in, to That's that more any to your of I at that said, in to But improvement the seeing unfortunate, kind I my be bring people Are adopting some able rigs. any think, hopefully, say, labor you are the new point problem force

Troy Meier

Canada. way much I haven't of -- in I the don't seen

going thaw down drilling And they the going into activity of be they'll that on. right now freeze where laying think I can't go now, right have because the through -- their actually and we'll be they thaw period period.

laying thaw's and in going you'll a again months once So the down up gone. couple probably then heavy rigs of see and picking

John Bair

note related the that party Okay. Can you you at In said was a $XXX,XXX. thing. elaborate cleared up One on all? that last receivable release, there press was

Chris Cashion

what -- that Tronco. that's Yes, is, that is

may we You set that. recall that valuation up in we receivable fully allowance that, XXX% XXXX, back reserved against a John, when so

the interest basis, Troy settle we piece can that a And note fully that so Annette recapture portion and was annual with an of reserved. we as that, then that of on

have fully back it's can take settle So receivable it. we would collecting that a that reserved when like other We income as you written down.

that what is. that's so And

John Bair

Okay. of review something And since you're that's have the then that? line it Great. time time of And now line to before to then listing, and great? on with they then compliant kind what's what's then and NYSE say submit you them the kind

Chris Cashion

have earnings do to or them, quarterly this weeks submit and call. we We X about to typically after Yes. a so report that

probably the submit So April, I'm our all with back with in QX. the typically to that the we've first That's the and been seen pattern over then and -- so or thumbs report maybe we'll report. X that weeks April, early accept be a week up for we'll come that they last us they take them date X of quarters. And setting

Operator

the question comes Adirondack Our Matthew next Funds. from line of with Reiner

Matthew Reiner

the have experience the know longer is, like that was you your you tool you've a your... you I First than it, better was with like And was out, now lasting, what is started question It first I versus feel tool. for guess, anticipated, in quality had do tool expected. Drill-N-Ream when than life more -- good life longer had you

Troy Meier

And We've do. it's that. ahead. we for got go feel Yes, a -- better

Matthew Reiner

it -- ballpark Yes. what Is And you of can it a tell That's was? is me kind you of it? what it? -- about -- it solidified have

Troy Meier

tools. the the closer runs, we the when to was was had that we of it's was going class to it we the just at started look looked pretty and much that basin out, modeled really originally we we were in only XX. model That's X-inch it -- -- model when thing from Bakken. in the the up at And When you XX

So lot we do. model have didn't we But from. now a to

beat we the look so drilling And Oman, as opportunities in wear, see in see tool mean, in like at what markets, although what the international those I markets, the to then really see we on really here it's up. environments the we really, in you the But tools, in see in usage North America. similar just the Kuwait, areas most Kuwait. tools is we they

But are. I modeling with out. at Oman, when environments. lot we so we're we different got And Kuwait totally we've look think you versus X lot a a -- this smarter know

predict to model that, out So Oman. a runs if going than less to be in and we model when going lot it's to try you're it

Matthew Reiner

it. Got

the Okay. $X.X of so going seen I it's a on declining like $X.X $X.X have D&A, in kind Chris. But it million year. then one housekeeping maybe you're few been some investments. for like last And sounds I've this a million from like to years the making just And million

is to -- depreciation I was you I I of supposed me then -- $XXX it it a of don't and starts. I intangible $X.X give kind maybe that drop million just know and under So if is ballpark amortization year to like can have the next this was is amortization year, mean $XXX,XXX million. roughly if right, your think

million you So I like should that still depreciation that some going was model just $X.X have range? a curious bit? Or if where are investments creeps to up

Chris Cashion

to going that's up Yes, bit. a creep

coming We're out some We've getting are expanding. got good talked Middle now. about revenue East. the that of Oman in We opportunities some near-term Troy

is to intellectual a we going So depreciation What 'XX down fully the amortized bucket property. versus inch bit. of D&A drove was XXXX a the up yes,

to and And led in of that -- last -- bucket was so fully that at year. May amortized

So more amortizing. bucket we're one intangibles we've of that got

last that third and fully bucket so be of XXXX, amortized. And intangibles would in

do it's go has But is a it going been that's And that expect you've the ballpark XXXX. over But down. depreciation million to you're yes, the up bit. And so yes, kind see going again. yes, But the drop up $X.X amortization we'll in number with got. slightly it of so -- -- expense

Operator

question-and-answer end over we call to time, this management And closing session. the At turn now any the for the of I back will have remarks. reached

Troy Meier

this. forward there's -- we management best do like And to that when we're our the 'XX said, I that -- now us we're -- our we're me and is look lot well. great just at opportunities. and at we We're the team capture 'XX, We're opportunities of we thing our products, the that and employee we've us, to going opportunities. the grow but call. some I about those, excites evaluating and in a things to and we look for And we I at you Drill-N-Ream, for have our to continue place, not what most think everybody, have in on. excited to we that the we can on need forward and again, what base have do joining going customers thanks very joining look But look for that for continue the do the -- Thanks seeing move I next on our I

Operator

and conference great have at call, your for today's time. and you concludes This this lines disconnect day. a participation may Thank your you

Superior Drilling Products (SDPI) 11 Mar 222021 Q4 Earnings call transcript