Executive Summary

Q1 2024 revenue was $4.95M, up 15.8% sequentially but down 21.3% year over year; Middle East revenue rose 10% sequentially while North America recovered on distributor order timing .
EPS was -$0.06, driven by $1.7M acquisition-related expenses tied to the pending sale to Drilling Tools International; Adjusted EBITDA improved to $0.84M (17.0% margin) from $0.44M (10.3%) in Q4 2023 .
Cost of revenue increased on underutilization and Middle East ramp, while SG&A decreased 9% YoY and 6% QoQ largely on lower patent-related legal fees .
Near-term catalyst: pending acquisition by DTI expected to close in Q3 2024; transaction consideration ~$32.2M as announced March 7, 2024 .

What Went Well and What Went Wrong

What Went Well

Sequential revenue growth: Total revenue rose 15.8% QoQ to $4.95M; North America up 16.8% on distributor order timing; Middle East up 10.1% .
Margin improvement: Adjusted EBITDA increased 91% QoQ to $0.84M, with margin expanding from 10.3% to 17.0% .
SG&A discipline: SG&A declined 9% YoY and 6% QoQ, largely due to lower patent infringement legal fees .
- Strategic context quote (March 7): “We are excited to merge with DTI… The combination of our patented technology and cutting-edge manufacturing capabilities with DTI’s powerful sales and marketing will enable us to accelerate our growth…” — Troy Meier, Chairman & CEO .

What Went Wrong

Year-over-year decline: Revenue down 21.3% YoY, primarily from lower tool sales tied to an 18% YoY U.S. rig count decline (avg. 623 rigs) .
Underutilization and ramp costs: Cost of revenue rose 18.9% QoQ on underutilization plus increased ME headcount and supplies; operating income fell sharply YoY to $0.16M (3.2% margin vs. 21.9% LY) .
Acquisition costs and cash use: $1.7M acquisition expenses drove a net loss of -$1.82M and operating cash use of -$0.30M; cash ended at $2.08M .

Financial Results

Core Financials vs Prior Periods

Metric	Q1 2023	Q4 2023	Q1 2024
Revenue ($USD Millions)	$6.28	$4.27	$4.95
Operating Income ($USD Millions)	$1.38	-$0.27	$0.16
Operating Margin (%)	21.9%	-6.4%	3.2%
Net Income ($USD Millions)	$1.51	$5.59	-$1.82
Diluted EPS ($)	$0.05	$0.18	-$0.06
Adjusted EBITDA ($USD Millions)	$2.02	$0.44	$0.84
Adjusted EBITDA Margin (%)	32.1%	10.3%	17.0%

Geographic Revenue Breakdown

Geography	Q1 2023 ($000)	Q4 2023 ($000)	Q1 2024 ($000)
North America	$5,475	$3,639	$4,249
International	$806	$633	$697
Total Revenue	$6,281	$4,273	$4,946

Product/Service Revenue Breakdown

Category	Q1 2023 ($000)	Q4 2023 ($000)	Q1 2024 ($000)
Tool (DNR) Revenue	$4,254	$2,512	$2,981
Contract Services	$2,027	$1,761	$1,965
Total Revenue	$6,281	$4,273	$4,946

KPIs and Balance Sheet

KPI	Q1 2023	Q4 2023	Q1 2024
Cost of Revenue ($000)	$2,239	$1,939	$2,305
SG&A ($000)	$2,339	$2,263	$2,130
Total Operating Expenses ($000)	$4,903	$4,546	$4,787
Cash from Operations ($000)	$1,045	N/A	-$304
Capital Expenditure ($000)	$1,568	N/A	$122
Cash and Equivalents ($000)	$1,956	$2,671	$2,080
Total Debt ($000)	N/A	$2,245	$2,101

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2023	$22.0M – $24.0M	Not provided in Q1 2024	N/A
SG&A Expense	FY 2023	$9.0M – $9.5M (incl. ~$1.2M legal)	Not provided in Q1 2024	N/A
Adjusted EBITDA	FY 2023	$5.5M – $6.5M	Not provided in Q1 2024	N/A

Note: No Q1 2024 forward guidance updates were furnished in the 8-K/press release; Q3 2023 guidance was reaffirmed at that time for FY 2023 .

Earnings Call Themes & Trends

Topic	Q3 2023 (Previous Mentions)	Q4 2023 (Previous Mentions)	Q1 2024 (Current Period)	Trend
Middle East expansion	Strengthened international technical support; preparing service & technology center; ME revenue growth YoY	ME operations advancing; capex focused on ME; ME rig count up YoY	International revenue +10% QoQ; ME operations advancing; higher ME staffing and supplies	Positive momentum; continued ramp
U.S. rig count/macro	U.S. rig count down 15% YoY; pressure on DNR sales and contract services	U.S. rig count down 20% YoY; NA demand constrained	Avg. U.S. rig count down 18% YoY; NA tool sales improved sequentially on order timing	Macro headwind YoY; sequential improvement
DNR tool sales	Pressured by U.S. rig count decline	Tool sales weaker in Q4; timing of distributor orders impacted	Tool (DNR) revenue +18.7% QoQ to $2.98M	Sequential rebound; still below LY
Patent litigation/legal costs	SG&A includes legal expenses; impact noted	SG&A includes strategic review fees; legal costs elevated	SG&A down; “largely due to lower patent infringement related legal fees”	Improving cost profile
Strider commercialization	Deferral referenced in forward-looking risks	Deferral referenced in forward-looking risks	Deferral referenced in forward-looking risks	Deferred; no new updates
Acquisition by DTI	Definitive agreement announced Mar 7, 2024; strategic rationale highlighted by CEO	—	Q1 includes $1.7M acquisition expenses; closing expected Q3 2024	Transaction progressing; expense impact in Q1

Management Commentary

Strategic merger rationale: “We are excited to merge with DTI… The combination of our patented technology and cutting-edge manufacturing capabilities with DTI’s powerful sales and marketing will enable us to accelerate our growth and bring our drilling solutions to more customers in more parts of the world.” — Troy Meier, Chairman & CEO (Mar 7, 2024) .
International build-out: The Company “further advances its operations in the Middle East… increasing rig counts in the ME region” (Q4 context); Q1 continues ME progress and sequential growth .
Cost discipline: SG&A decreased “largely due to lower patent infringement related legal fees” (Q1) .

Q&A Highlights

Not applicable; no Q1 2024 earnings-call transcript or Q&A was furnished in the company’s filings repository, unlike Q3 2023 where a call and slide deck were provided .

Estimates Context

S&P Global/Capital IQ consensus estimates for Q1 2024 were unavailable due to missing CIQ mapping for SDPI. As a result, we cannot quantify beats/misses versus Wall Street consensus.

Metric	Q1 2024 Consensus (S&P Global)	Q1 2024 Actual
Primary EPS Consensus Mean	Unavailable	-$0.06
Revenue Consensus Mean	Unavailable	$4.95M

Note: S&P Global consensus unavailable due to missing CIQ mapping for SDPI in spgi_ciq_company_map.

Key Takeaways for Investors

Sequential recovery with improving profitability: Revenue +15.8% QoQ and Adjusted EBITDA margin expanded from 10.3% to 17.0% on higher North America orders and ongoing Middle East ramp .
YoY headwinds persist: U.S. rig count decline (-18% YoY) continues to pressure tool sales and contract services; monitor macro trajectory and rig count trends .
Costs under control: SG&A declined YoY/QoQ, with legal spend moderating; operating leverage should improve if volumes normalize and ME scaling efficiencies materialize .
Transaction overhang and near-term optics: $1.7M acquisition-related expense led to net loss and negative operating cash in Q1; expect further transaction-related noise until the DTI deal closes (expected Q3 2024) .
Balance sheet stable: Cash at $2.08M and total debt ~$2.1M; watch working capital swings tied to distributor order timing and ME expansion .
Trade setup: Near-term catalyst is deal closure; any update on timing or regulatory steps could move shares; fundamental upside hinges on sustained ME growth and stabilization in U.S. activity .
Medium-term thesis: Post-combination, DTI’s distribution may accelerate DNR and Strider adoption; integration and synergy realization path will be key to valuation rerating .

Sources: Company 8-K/press releases and financial tables for Q1 2024, Q4 2023, and Q3 2023 .

Superior Drilling Products, Inc. (SDPI)·Q1 2024 Earnings Summary