Financial Performance - Total revenue for the three months ended March 31, 2024, was $36.974 million, a decrease of 9% from $40.799 million in the same period of 2023[197]. - Net income for the three months ended March 31, 2024, was $3.126 million, down from $5.701 million in the same period of 2023[197]. - Adjusted EBITDA decreased to $10.9 million for Q1 2024 from $14.8 million in Q1 2023, reflecting underlying trends in business performance[212]. - Net cash provided by operating activities was $3.3 million for Q1 2024, down from $7.1 million in Q1 2023, influenced by changes in operating assets and liabilities[222]. Revenue Breakdown - Tool rental revenue decreased by $2.310 million, or 7%, to $29.966 million for the three months ended March 31, 2024, compared to $32.276 million in 2023[199]. - Product sale revenue decreased by $1.515 million, or 18%, to $7.008 million for the three months ended March 31, 2024, compared to $8.523 million in 2023[200]. - As of March 31, 2024, 30.0% of total revenue was generated from two customers, with accounts receivable from these customers amounting to approximately $6.6 million[238]. Cost and Expenses - The company expects total costs and expenses to increase in absolute dollars in future periods due to anticipated growth in revenue and employee headcount[188]. - Tool rental revenue cost decreased by $1.1 million, or 14%, to $7.0 million for Q1 2024 compared to $8.1 million in Q1 2023, primarily due to reduced rental activity[202]. - Product sale revenue cost increased by $0.2 million, or 18%, to $1.5 million for Q1 2024 compared to $1.3 million in Q1 2023, driven by additional costs from the acquisition of Deep Casing Tools[203]. - Selling, general, and administrative expenses decreased by $0.5 million, or 3%, to $17.9 million for Q1 2024 compared to $18.4 million in Q1 2023, mainly due to lower bonus expenses[204]. - Depreciation and amortization expenses increased by $0.4 million, or 7%, to $5.4 million for Q1 2024 compared to $5.0 million in Q1 2023, attributed to additions to property, plant, and equipment[205]. - Interest expense decreased by $0.4 million, or 68%, to $0.2 million for Q1 2024 compared to $0.6 million in Q1 2023, due to a reduction in interest expense on the revolving line of credit[206]. - Other expense increased by $1.2 million, or 2913%, to $1.1 million for Q1 2024 compared to Q1 2023, primarily due to transaction costs related to a business combination[209]. Market Conditions - The average U.S. onshore rig count was 602 for the three months ended March 31, 2024, compared to 742 for the same period in 2023[175]. - WTI oil price was approximately $84 per barrel as of March 31, 2024, reflecting ongoing volatility in the oil market[169]. - Henry Hub natural gas spot prices decreased from an average of $2.31 per MMBtu in March 2023 to $1.49 per MMBtu in March 2024[173]. - 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[242]. Strategic Plans - The company plans to increase investments in its sales and marketing organization to drive additional revenue and expand its global customer base[193]. - The company has not entered into any hedging arrangements to mitigate foreign currency exchange rate fluctuations, which may impact future results as international market presence expands[240]. Accounting and Compliance - The company utilizes the acquisition method of accounting for business combinations, allocating total purchase consideration to acquired assets and assumed liabilities based on estimated fair values[229]. - The accounting for business combinations must be completed within one year from the acquisition date, with adjustments potentially impacting financial statements[233]. - Costs directly attributable to business combinations are expensed as incurred, affecting the condensed consolidated statements of income[234]. - The company has elected to take advantage of the extended transition period under the JOBS Act, delaying the adoption of certain accounting standards[236]. - The estimated fair values assigned to acquired assets and liabilities are based on reasonable assumptions, but are subject to uncertainty and potential material changes[232]. Risk Management - The company monitors credit quality of customers and maintains an allowance for doubtful accounts to address potential losses from customer payments[237]. - The company has established an incident response plan and team to address cybersecurity risks, although there is no assurance that these efforts will fully mitigate such risks[243].
ROC ENERGY ACQUI(ROC) - 2024 Q1 - Quarterly Report