Superior Drilling Products, Inc.

The company did not provide consolidated revenue or EPS figures in the prepared remarks, but it said third-quarter Contract Services revenue was $1.8 million and tool revenue was down slightly year over year. International revenue increased 6% year over year, while North America revenue declined slightly year over year; the average U.S. rig count was 650, down 111 rigs or 15% year over year. SG&A was up roughly 50% year over year, including $260,000 of litigation legal expenses in the quarter and just over $1 million year to date. Cash from operations totaled $4.1 million year to date, cash ended the quarter at $4 million, and total debt was $2.5 million. For 2023, management reiterated revenue guidance of $22 million to $24 million, SG&A of $9 million to $9.5 million, adjusted EBITDA of $5.5 million to $6.5 million, and capital spending of $3.5 million to $4 million.

Troy Meier emphasized that the company is repositioning itself for longer-term growth, especially in the Middle East, where it now has the ISO certifications needed to do work in places like Abu Dhabi and Saudi Arabia. He described the Drill-N-Ream product as performing well in MENA and said the team is building a technical database and customer-facing proof points to support future sales and possible strategic options. His tone was cautiously optimistic: he sees near-term softness in North America, but believes the domestic market has bottomed and that volumes should improve into 2024.

Chris Cashion said the quarter was challenged by lower domestic rig counts, which reduced demand and pressured margins through fixed-cost under-absorption and unfavorable mix. He pointed to several specific cost items: $260,000 of litigation expense in the quarter, just over $1 million year to date, additional travel costs tied to the Middle East reorganization, and costs related to strategic M&A evaluation. On the positive side, he highlighted $4.1 million of year-to-date cash from operations, $4 million of cash at quarter end, $2.5 million of debt, and a new credit facility that improves liquidity, extends maturities, and includes an AR purchase program.

Analysts focused on the organizational changes, asking whether cuts were in North America or the Middle East; management said North America reductions were mainly in machining tied to slower third-party work, while the Middle East changes were a reset away from a sales-and-marketing approach toward a more technical, database-driven model. Questions also centered on market share and contract services, and management said customers often test alternatives but return to Drill-N-Ream because of performance, with the channel partner gaining share despite the rig decline. On the second contract-services customer, Troy Meier said Q3 was mostly a proving period, but he expects more volume in Q4 and stronger momentum in Q1 as the relationship matures.