Financial Performance - Total tool rental and product sales revenue for Q2 2023 was $37.9 million, up from $30.4 million in Q2 2022, representing a 24.5% increase[149] - Net income for the six months ended June 30, 2023, was $6.6 million, compared to $7.3 million for the same period in 2022, reflecting a decrease of 9.6%[149] - Total revenue, net for the six months ended June 30, 2023, was $78.7 million, an increase of $22.4 million, or 40%, compared to $56.3 million for the same period in 2022[181] - Net income for the three months ended June 30, 2023, was $937,000, a decrease of $4.9 million, or 83%, compared to $5.9 million for the same period in 2022[181] - Adjusted EBITDA for the six months ended June 30, 2023 was $28.1 million, up from $15.1 million in 2022[215] Revenue Breakdown - Tool rental revenue increased by $6.0 million, or 26%, to $29.0 million for the three months ended June 30, 2023, compared to $23.0 million for the same period in 2022[183] - Product sale revenue rose by $1.6 million, or 21%, to $8.9 million for the three months ended June 30, 2023, compared to $7.3 million for the same period in 2022[184] Costs and Expenses - Total costs and expenses for the six months ended June 30, 2023, were $62.5 million, an increase of $15.4 million, or 33%, compared to $47.1 million for the same period in 2022[181] - Selling, general, and administrative expenses increased by $8.2 million, or 87%, to $17.7 million for the three months ended June 30, 2023, compared to $9.5 million for the same period in 2022[188] - Cost of tool rental revenue increased by $1.0 million, or 15%, to $7.7 million for the three months ended June 30, 2023, compared to $6.7 million for the same period in 2022[186] - Cost of tool rental revenue for the six months ended June 30, 2023, increased by $2.8 million, or 22%, to $15.8 million compared to $13.0 million for the same period in 2022[199] Cash Flow and Financial Position - Free Cash Flow for the six months ended June 30, 2023 was $(10.6) million, compared to $(7.0) million in 2022[213] - Net cash provided by operating activities was $14.1 million for the six months ended June 30, 2023, compared to $2.2 million in 2022[222] - Net cash used in investing activities was $13.4 million for the six months ended June 30, 2023, with purchases of property, plant, and equipment totaling $24.6 million[223] - Net cash provided by financing activities was $4.3 million for the six months ended June 30, 2023, resulting from proceeds from the Business Combination and PIPE Financing[225] - As of June 30, 2023, the company had cash and cash equivalents of $7.2 million and an accumulated deficit of $14.4 million[149] Market Conditions - The average U.S. onshore rig count was 719 for Q2 2023, compared to 716 for Q2 2022, indicating a slight increase in drilling activity[160] - WTI oil prices were approximately $71 per barrel as of June 30, 2023, down from a high of $106 per barrel in June 2022[156] - Henry Hub natural gas spot prices decreased from an average of $7.70 per MMBtu in June 2022 to $2.18 per MMBtu in June 2023[158] - The company expects continued inflation and concerns regarding a possible recession to weigh on the outlook for oil demand, potentially impacting demand for its goods and services[231] Strategic Plans - The company expects total costs of tool rental and product sales revenue to increase in absolute dollars due to anticipated growth in revenue and employee headcount[173] - The company plans to increase investments in sales and marketing to drive additional revenue and expand its global customer base[178] - The company anticipates that gross margins will improve slightly as it leverages its existing cost structure to support increased business activity[174] Risks and Challenges - The company has incurred significant operating losses since inception, indicating ongoing challenges in achieving profitability[149] - The company has not entered into any hedging arrangements to minimize foreign currency exchange rate fluctuations, which may impact future cash flows[229] - Inflationary pressures on the cost structure are expected to continue, although raw material and component costs are moderating due to a strengthening U.S. dollar[231] - The company continues to monitor the credit quality of its customers and maintains an allowance for doubtful accounts for estimated losses[227] - The company has established a cybersecurity incident response plan and team to address potential cybersecurity risks, although there is no assurance that these efforts will fully mitigate such risks[232] Accounting and Compliance - There have been no material changes to critical accounting policies and estimates compared to previous disclosures[235] - The company has elected to take advantage of the extended transition period under the JOBS Act, delaying the adoption of certain accounting standards[237] - The company does not believe that foreign currency risk had a material effect on its business or financial condition during the reported periods[230] Customer Concentration - 33% of total revenue for the three months ended June 30, 2023, was earned from two customers, compared to 30% for the same period in 2022[228] - Amounts due from these two customers included in accounts receivable at June 30, 2023, were approximately $10.1 million[228]
Rank One Computing(ROC) - 2023 Q2 - Quarterly Report