Financial Performance - For the three months ended September 30, 2023, the company generated revenue of $38.1 million from tool rentals and product sales, compared to $36.5 million for the same period in 2022, reflecting a growth of 4.4%[154] - The net income for the three months ended September 30, 2023, was $4.3 million, down from $7.0 million in the same period of 2022, indicating a decrease of 38.6%[154] - For the nine months ended September 30, 2023, total revenue was $116.8 million, up from $92.9 million in 2022, representing a year-over-year increase of 25.7%[154] - Total revenue, net for the three months ended September 30, 2023, was $38.1 million, an increase from $36.5 million in the same period of 2022[185] - Tool rental revenue increased by $2.5 million, or 9%, to $29.4 million for the three months ended September 30, 2023, compared to $26.8 million for the same period in 2022[187] - Product sale revenue decreased by $0.9 million, or 10%, to $8.8 million for the three months ended September 30, 2023, compared to $9.7 million for the same period in 2022[188] - Tool rental revenue increased by $20.4 million, or 29%, to $90.6 million for the nine months ended September 30, 2023, compared to $70.3 million for the same period in 2022[201] - Product sale revenue increased by $3.6 million, or 16%, to $26.2 million for the nine months ended September 30, 2023, compared to $22.6 million for the same period in 2022[202] Costs and Expenses - Total costs and expenses for the three months ended September 30, 2023, were $31.0 million, compared to $28.5 million for the same period in 2022[185] - Selling, general, and administrative expenses increased by $1.9 million, or 13%, to $16.6 million for the three months ended September 30, 2023, compared to $14.7 million for the same period in 2022[193] - Depreciation and amortization expenses increased by $0.5 million, or 10%, to $5.3 million for the three months ended September 30, 2023, compared to $4.8 million for the same period in 2022[194] - Interest expense increased by $28 thousand, or 62%, to $0.1 million for the three months ended September 30, 2023, compared to $45 thousand for the same period in 2022[195] - Personnel-related expenses increased by $5.0 million, with stock-based compensation rising by $1.7 million due to the Merger[208] - Interest expense surged to $1.0 million, a 2327% increase compared to $41 thousand in the prior year, primarily due to the settlement of the interest rate swap[210] - Other expense increased by $6.0 million, or 2852%, to $6.2 million, primarily due to transaction fees related to the Business Combination[213] Cash Flow and Financial Position - Free Cash Flow for the nine months ended September 30, 2023 was $(19.3) million, compared to $(10.6) million in the prior year[218] - Adjusted EBITDA increased to $40.8 million for the nine months ended September 30, 2023, up from $28.1 million in the prior year[220] - Net cash provided by operating activities was $17.5 million for the nine months ended September 30, 2023, compared to $5.6 million in the prior year[227] - Net cash used in investing activities was $20.0 million, with purchases of property, plant, and equipment totaling $36.7 million[228] - As of September 30, 2023, the company had $4.0 million in cash and cash equivalents, sufficient for at least the next 12 months[221] - Net cash provided by financing activities for the nine months ended September 30, 2023 was $4.3 million, resulting from proceeds of $23.1 million from the Merger and PIPE Financing, net of transaction costs[230] Market and Operational Insights - The average U.S. onshore rig count for the three months ended September 30, 2023, was 627 rigs, compared to 741 rigs for the same period in 2022, showing a decline of 15.4%[164] - WTI oil prices were approximately $89 per barrel as of September 30, 2023, reflecting a recovery from a low of $67 per barrel in March 2023[160] - The company expects its tool rental services revenue to increase over time due to anticipated growth in drilling activity and customer pricing[173] - The company plans to increase investments in its sales and marketing organization to drive additional revenue and expand its global customer base[182] Risks and Challenges - The company is experiencing rising costs due to global inflation, which is expected to impact profitability in the near term[165] - The company anticipates that gross margins will improve slightly as it leverages its existing cost structure to support increased business activity[178] - The company expects to continue experiencing inflationary pressures on its cost structure for the foreseeable future, although raw material and component costs are moderating[242] - The company has not entered into any hedging arrangements to minimize the impact of foreign currency exchange rate fluctuations[240] - The company does not believe that foreign currency risk had a material effect on its business during the periods presented[241] Customer Concentration - During the three and nine months ended September 30, 2023, 28% of total revenue was earned from two customers, compared to 26% and 27% for the same periods in 2022[239] - Amounts due from these two customers included in accounts receivable at September 30, 2023 were approximately $8.4 million[239] Accounting and Compliance - There have been no material changes to the company's critical accounting policies and estimates compared to previous reports[234] - The company has irrevocably elected to take advantage of the extended transition period under the JOBS Act, delaying the adoption of certain accounting standards[236] Cybersecurity - Cybersecurity risk mitigation efforts include regular testing of systems and an established incident response plan, though there is no assurance that these efforts will fully mitigate risks[243]
ROC ENERGY ACQUI(ROC) - 2023 Q3 - Quarterly Report