• Second quarter revenue was $4.5 million
• Adjusted EBITDA, a non-GAAP measure*, was $1.7 million, or 37.6% of revenue
• Investing in growth: Building sales team and distribution infrastructure for rental tools
• Company expects revenue in range of $19 million to $22 million for 2014 with Adjusted EBITDA* of $6.5 million to $8.5 million

VERNAL, Utah, Aug. 14, 2014 (GLOBE NEWSWIRE) -- Superior Drilling Products, Inc. (NYSE MKT:SDPI) ("SDPI" or the "Company"), a provider of drilling products for the oil, natural gas and mining services industries, today reported its financial results for its second quarter ended June 30, 2014. Second quarter 2014 results include Hard Rock Solutions, LLC ("Hard Rock") which was acquired on May 29, 2014. The Hard Rock acquisition provided SDPI with the innovative Drill N Ream^TM tool.

Troy Meier, Founder, Chairman and CEO of Superior Drilling Products, noted, "I am pleased with the progress we are making in the short time we have owned the Drill N Ream. We are investing in our sales force and distribution facilities to drive growth. Since the acquisition, we have added five new sales personnel and established a new distribution facility in Oklahoma. This is a stocking point for our tools and a base for our sales force to provide responsive service to the region and accommodate for the higher volume we anticipate. We believe our customers are enthusiastic to be working with us and recognize the tool's value in their operations." 

Second quarter 2014 revenue was $4.5 million, up $1.5 million, or 50.7% from the second quarter of 2013. The 2014 second quarter included one month of the Hard Rock acquisition which contributed $693 thousand of revenue. Organic revenue was $3.8 million, up 27.3% from $3.0 million in the prior-year period. Demand for the Company's drill bit refurbishing services and custom fabrication services increased $1.2 million. Prior to owning Hard Rock and the Drill N Ream tool, SDPI sold the tool to Hard Rock and received royalty rent income based on Hard Rock's tool rental revenue.  Last year's quarter had three full months of royalty rent income, or $0.4 million more than the current period.

*Adjusted earnings before interest, taxes, depreciation, amortization and other expense ("Adjusted EBITDA") was $1.7 million, or 37.6% of revenue, compared with Adjusted EBITDA of $1.1 million, or 36.0% of revenue, in last year's second quarter. SDPI believes that when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached tables for important disclosures regarding SDPI's use of Adjusted EBITDA, as well as a reconciliation of net income to Adjusted EBITDA.

Adjusted net income, a non-GAAP measure, was $0.4 million, or $0.03 per diluted share. The adjustment excludes a $1.1 million one time, non cash, deferred tax expense related to the reorganization of the Company from a limited liability organization to a corporation. Adjusted net income also excludes $0.2 million, pre tax, in intangible asset amortization associated with the Hard Rock acquisition. GAAP net loss was $0.7 million, or $0.06 loss per diluted share. See attached tables for a reconciliation of GAAP net loss to adjusted net income.

Second Quarter 2014 Review

During the month of ownership of the Drill N Ream tool in the second quarter, the Company performed a total of 29 reaming runs using the Drill-N-Ream tool. SDPI has solid market share in the Bakken formation and is aggressively working on expanding the use of the Drill N Ream tool into Oklahoma and Texas.

Total operating expenses were $3.6 million, up from $2.1 million in the second quarter of last year. While the cost of revenue was up just 8.8%, or $0.1 million, from the 50.7% increase in volume, selling, general and administrative (SG&A) expenses increased $0.8 million and depreciation and amortization (D&A) was up $0.6 million. Higher SG&A and D&A expenses included just one month of costs related to the new sales force, incremental expenses associated with Hard Rock and higher legal, accounting and audit fees related to becoming a publicly-traded company. 

Operating income of $0.9 million improved 1.2% from the prior-year period. Operating margin as a percent of sales was 19.1% compared with operating margin of 28.4% in the prior-year period. 

First Half 2014 Review

Higher customer demand resulted in a $2.4 million, or 41.5%, increase in sales for the first six months of 2014 to $8.2 million compared with the prior-year period. 

Total operating expense for the first half of 2014 was $6.2 million compared with $4.0 million in the prior-year period.  Operating income of $2.0 million increased by $0.2 million over the first half of 2013. Operating margin as a percent of sales was 24.1%. 

Adjusted EBITDA was $3.2 million, or 38.7% of revenue, compared with $2.3 million, or 40.5% of revenue, in the prior-year period. See the attached tables for important disclosures regarding SDPI's use of EBITDA, as well as a reconciliation of net income to EBITDA.

Adjusted net income, a non-GAAP measure, was $0.9 million, or $0.09 per diluted share. The adjustment excludes the $1.1 million one time, non cash, deferred tax expense previously discussed and $0.2 million, pre tax, in intangible asset amortization associated with the Hard Rock acquisition. GAAP net income was $0.2 million, or $0.02 per diluted share. See attached tables for a reconciliation of GAAP net income to adjusted net income.

Balance Sheet Strengthened by IPO 

On May 29, 2014, the Company completed its IPO selling 7,762,500 shares of common stock at $4.00 per share resulting in net proceeds to the Company of $28.7 million. Approximately $12.5 million of the proceeds went towards the $25.0 million acquisition price of the Company's purchase of Hard Rock Solutions LLC. Approximately $8.3 million of the proceeds was applied to debt repayment. At June 30, 2014 the Company had $7.7 million in cash on hand.

Outlook for 2014 

The Company expects full year revenue will be in a range of $19 million to $22 million, with sales weighted more heavily in the fourth quarter. Adjusted EBITDA is expected to be approximately $6.5 million to $8.5 million. 

Mr. Meier concluded, "We have been gaining momentum through the summer and believe we have an excellent opportunity to accelerate our growth with this innovative well bore conditioning technology. Our strategy is to build out our sales infrastructure to support an expanded rental service structure in order to have our technology employed on a larger number of drilling rigs.  The investments we are making in our sales and operations, as well as the cost of being a public company, we believe provide us the foundation to execute this strategy."

Webcast and Conference Call

Superior Drilling Products will host a conference call and live webcast tomorrow at 10:00 am MT (12:00 pm ET) to provide a strategic update and outlook as well as review the operating results for its second quarter 2014. The discussion will be accompanied by a slide presentation that will be made available immediately prior to the conference call on Superior Drilling Products' website at www.sdpi.com/events_presentations.html. A question-and-answer session will follow the formal presentation. 

The conference call can be accessed by calling (201) 689-8470. Alternatively, the webcast can be monitored on Superior Drilling Products' website at www.sdpi.com/events_presentations.html.

To listen to the archived call, dial (858) 384-5517 and enter replay number 13585907. A telephonic replay will be available from approximately 1:00 pm MT (3:00 pm ET) on the day of the call through Friday, August 22, 2014. A transcript of the call will be available for download from the Superior Drilling Products website once available.

About Superior Drilling Products, Inc.

SDPI is an innovative, cutting-edge drilling tool technology company. The Company manufactures, repairs, sells and rents drilling tools. SDPI is a manufacturer and refurbisher of PDC (polycrystalline diamond compact) drill bits for a leading oil field services company. In addition, SDPI manufactures and markets drill string tools, including the patented Drill-N-Ream™ well bore conditioning tool, for the oil, natural gas and mining services industries. SDPI operates a state-of-the-art drill tool machining facility manufacturing for its customer's custom products and solutions for the drilling industry. The Company's strategy is to leverage is technological expertise in drill tool technology and innovative, precision machining to broaden its drill tool technology offerings for rent or sale, while establishing an effective sales and logistics infrastructure through which it can provide proprietary tools to exploration and production companies and drill rig operators. It also plans to grow its manufacturing operations by providing its oil field services customers with design, prototype development and manufacturing of their proprietary technologies. 

Additional information about the Company can be found at its website: www.sdpi.com.

Safe Harbor Regarding Forward Looking Statements

This news release contains forward-looking statements and information that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this release, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management, are forward-looking statements. The use of words "could," "believe," "anticipate," "intend," "estimate," "expect," "may," "continue," "predict," "potential," "project", "forecast," "should" or "plan, and similar expressions are intended to identify forward-looking statements, although not all forward -looking statements contain such identifying words. Certain statements in this release may constitute forward-looking statements, including statements regarding the Company's financial position, market success with specialized tools, effectiveness of its sales efforts, success at developing future tools, and the Company's effectiveness at executing its business strategy and plans. These statements reflect the beliefs and expectations of the Company and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, our business strategy and prospects for growth; our cash flows and liquidity; our financial strategy, budget, projections and operating results; the amount, nature and timing of capital expenditures; the availability and terms of capital; competition and government regulations; and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the Company's plans and described herein.