Financial Performance - Total revenue for the three months ended September 30, 2024, was $40.1 million, a 5.1% increase from $38.1 million in the same period of 2023[182]. - Net income for the three months ended September 30, 2024, was $0.9 million, a decrease of 79.8% compared to $4.3 million for the same period in 2023[182]. - Tool rental revenue for the three months ended September 30, 2024, was $28.1 million, down 4.2% from $29.4 million in 2023[214]. - Product sales revenue increased by 36.5% to $12.0 million for the three months ended September 30, 2024, compared to $8.8 million in 2023[214]. - Tool rental revenue decreased by $1.2 million, or 4%, to $28.1 million for the three months ended September 30, 2024, compared to $29.4 million for the same period in 2023[216]. - Product sale revenue increased by $3.2 million, or 36%, to $12.0 million for the three months ended September 30, 2024, compared to $8.8 million for the same period in 2023, driven by acquisitions of Deep Casing and Diamond Products Division[217]. - Tool rental revenue decreased by $4.2 million, or 5%, to $86.4 million for the nine months ended September 30, 2024, compared to $90.6 million for the same period in 2023[227]. - Product sale revenue increased by $1.9 million, or 8%, to $28.2 million for the nine months ended September 30, 2024, compared to $26.2 million for the same period in 2023[228]. - Adjusted EBITDA for the nine months ended September 30, 2024 was $30.98 million, down 24.2% from $40.84 million in 2023[239]. Expenses and Costs - Cost of tool rental revenue decreased by $3.3 million, or 44%, to $4.1 million for the three months ended September 30, 2024, primarily due to reduced labor and repair costs[219]. - Cost of product sale revenue increased by $3.9 million, or 216%, to $5.7 million for the three months ended September 30, 2024, driven by additional costs from Deep Casing and Diamond Products Division[220]. - Selling, general, and administrative expenses increased by $3.3 million, or 20%, to $19.9 million for the three months ended September 30, 2024, primarily due to increased personnel-related fees[221]. - Selling, general, and administrative expenses increased by $6.4 million, or 13%, to $57.4 million for the nine months ended September 30, 2024, compared to $51.0 million for the same period in 2023[232]. - Interest expense increased by $965 thousand, or 1322%, to $1.0 million for the three months ended September 30, 2024, due to a new term loan and drawn Credit Facility[224]. - Other expense increased by $2.3 million, or 1710%, to $2.4 million for the three months ended September 30, 2024, primarily due to transaction costs related to the acquisition of SDPI[225]. Cash Flow and Liquidity - As of September 30, 2024, cash and cash equivalents were $12.0 million, with an accumulated deficit of $2.2 million[182]. - As of September 30, 2024, the company had $12.0 million in cash and cash equivalents, with sufficient liquidity to meet working capital requirements for at least the next 12 months[240]. - Net cash provided by operating activities for the nine months ended September 30, 2024 was $9.7 million, a decrease of 44.7% from $17.5 million in 2023[246]. - Net cash used in investing activities for the nine months ended September 30, 2024 was $46.1 million, primarily due to business acquisitions of $38.6 million[248]. - Net cash provided by financing activities for the nine months ended September 30, 2024 was $43.4 million, resulting from proceeds from a term loan of $25 million and a revolving line of credit of $30.1 million[250]. - The company incurred $21.1 million in non-cash charges for depreciation and amortization during the nine months ended September 30, 2024[247]. Market Conditions and Risks - The WTI oil price was approximately $68.75 per barrel as of September 30, 2024, reflecting ongoing market volatility[187]. - Henry Hub natural gas spot prices decreased from $2.64 per MMBtu in September 2023 to $2.28 per MMBtu in September 2024[191]. - The average monthly rig count in the Western Hemisphere decreased to 947 rigs in 2024 from 1,007 rigs in 2023, while the Eastern Hemisphere rig count increased slightly to 736 rigs from 739 rigs[193]. - Inflationary pressures on the cost structure are expected to continue, although raw material costs are moderating due to a strengthening U.S. dollar[266]. - Concerns regarding a possible recession may negatively impact oil demand, which could affect demand for the company's goods and services[266]. Strategic Plans - The company expects total costs and expenses to increase in absolute dollars due to anticipated growth in revenue and employee headcount[206]. - The company plans to increase investments in sales and marketing to drive additional revenue and expand its global customer base[211]. - The company is actively evaluating capital requirements for both short-term and long-term liquidity needs amid risks such as inflation and rising interest rates[248]. Financial Management and Risks - The company expects federal net operating loss carryforwards to substantially reduce cash tax payments over the next several years[245]. - The company maintains cash and cash equivalents with major financial institutions, with potential concentrations of credit risk in accounts receivable[262]. - The majority of sales are denominated in United States and Canadian dollars, exposing the company to foreign currency risk as it expands internationally[264]. - The company has not entered into any hedging arrangements to mitigate foreign currency fluctuations, but does not believe this risk materially affected operations[265]. - The company has implemented a suite of cybersecurity controls, including regular testing and an incident response plan, but cannot guarantee complete mitigation of cybersecurity risks[267].
ROC ENERGY ACQUI(ROC) - 2024 Q3 - Quarterly Report