Financial Performance - Total revenue for the three months ended June 30, 2024, was $37.5 million, a decrease of 1% from $37.9 million in the same period of 2023[163]. - Net income for the three months ended June 30, 2024, was $0.4 million, down from $0.9 million in the same period of 2023, representing a decline of 56%[163]. - Adjusted EBITDA for the three months ended June 30, 2024, was $8.965 million, down 32% from $13.265 million in the same period of 2023[221]. - For the three months ended June 30, 2024, the company reported a net income of $365,000, a decrease of 61% compared to $937,000 in the same period of 2023[221]. - For the six months ended June 30, 2024, net cash provided by operating activities was $4.391 million, a significant decrease from $14.061 million in the same period of 2023[230]. - The company reported a net increase in cash and cash equivalents of $781,000 for the six months ended June 30, 2024, compared to an increase of $4.804 million in the same period of 2023[230]. Revenue Breakdown - Tool rental revenue for the three months ended June 30, 2024, was $28.3 million, a decrease of 2.3% from $29.0 million in 2023[195]. - Product sales revenue for the three months ended June 30, 2024, was $9.2 million, an increase of 3.3% from $8.9 million in 2023[195]. - Tool rental revenue decreased by $3.0 million, or 5%, to $58.3 million for the six months ended June 30, 2024, primarily due to decreased market activity in certain divisions[209]. - Product sale revenue increased by $0.3 million, or 3%, to $9.2 million for the three months ended June 30, 2024, driven by additional sales from Deep Casing acquired in March 2024[199]. Costs and Expenses - Total costs and expenses for the three months ended June 30, 2024, were $35.3 million, an increase of 12.9% from $31.3 million in 2023[195]. - Selling, general, and administrative expenses for the three months ended June 30, 2024, were $19.6 million, up 10.1% from $17.7 million in 2023[195]. - Cost of tool rental revenue decreased by $0.2 million, or 3%, to $7.5 million for the three months ended June 30, 2024, primarily due to lower labor and repair costs[201]. - Cost of product sale revenue increased by $1.4 million, or 120%, to $2.5 million for the three months ended June 30, 2024, mainly due to additional costs from Deep Casing[202]. - Selling, general, and administrative expenses increased by $1.9 million, or 11%, to $19.6 million for the three months ended June 30, 2024, driven by higher personnel-related fees[203]. - Depreciation and amortization expenses increased by $1.0 million, or 20%, to $5.7 million for the three months ended June 30, 2024, due to a higher property, plant, and equipment balance[204]. - Interest expense increased by $463 thousand, or 133%, to $0.8 million for the three months ended June 30, 2024, primarily due to increased interest on a term loan entered into in March 2024[205]. Market Conditions - The average U.S. onshore rig count was 583 for the three months ended June 30, 2024, down from 698 in the same period of 2023, reflecting a decline of 16.5%[174]. - The WTI oil price as of June 30, 2024, was approximately $83.29 per barrel, reflecting ongoing volatility in the oil market[168]. - The company is experiencing rising costs due to global inflation, impacting profitability in the near term[175]. - Inflationary pressures on the company's cost structure are expected to continue, although raw material and component costs are moderating[252]. Future Outlook - The company expects tool rental services revenue to increase over time due to anticipated growth in drilling activity and market share[183]. - The company expects that federal net operating loss carryforwards will substantially reduce cash tax payments over the next several years[229]. - The company’s capital expenditures are influenced by demand for services and cash flow generated by operations, with ongoing investments to maintain and upgrade rental tools and equipment[227]. Cash Flow and Financing - The company had $6.8 million in cash and cash equivalents as of June 30, 2024, with sufficient liquidity to meet working capital requirements for at least the next 12 months[224]. - Net cash used in investing activities for the six months ended June 30, 2024, was $26.728 million, primarily due to purchases of property, plant, and equipment of $16.3 million and the acquisition of CTG for $18.2 million[233]. - Net cash provided by financing activities for the six months ended June 30, 2024, was $23.495 million, resulting from proceeds from a term loan of $25 million[235]. - The company incurred $2.020 million in transaction expenses for the three months ended June 30, 2024, compared to $4.142 million in the same period of 2023[221]. Risk Management - The company has established a cybersecurity incident response plan and team to address potential risks, but there is no assurance that these measures will fully mitigate cybersecurity risks[253]. - The company has not entered into any hedging arrangements to minimize foreign currency exchange rate fluctuations, which may impact future operations[250].
ROC ENERGY ACQUI(ROC) - 2024 Q2 - Quarterly Report