Q3 2021 Superior Drilling Products Inc Earnings Call
Greetings and welcome to the superior drilling products third quarter 2021 financial results. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Mind you. This conference is being recorded I would now like to turn the conference over to your host Ms. Deb Pawlowski Investor Relations for superior drilling products. Thank you you may begin.
Thanks, Melissa and Hello, everyone. We certainly appreciate your joining us today is superior drilling products reports on it.
Third quarter of 'twenty, 'twenty, one and talks about the.
Progress, we're making with our strategy and growth.
I have joining me Troy Meier, our chairman and CEO and Chris Cashman, Our Chief Financial Officer, you should have a copy of the financial results that we released before the market. This morning, and you should also have the slides that will accompany our conversation today. If you don't you can find both of those documents on our website at S. P. P I dot com.
Uh huh.
Turning to slide two I will point out that we may make some forward looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties are provided in the earnings release the slides.
Other documents filed by the company with the Securities and Exchange Commission.
All of these documents can be found on our website or at SEC Gov.
Want to also point out that during today's call. We will discuss some non-GAAP financial measures, which we believe will be useful in evaluating our performance you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.
We have provided reconciliations of non-GAAP with comparable GAAP measures in the tables accompanying the earnings release as well as in the slide deck.
So with that if you would turn to slide three I will turn it over to Troy to begin.
Thanks Deb.
Thanks, everyone. We appreciate you all taking the time to participate in our call today.
So as we go through this slide decks, you know I want you to keep in mind that some of the things that we've been working on.
As we've talked about our quality management system I'd like to start there.
All know we've been we've been working on that for about the last year and a half.
And I'm, sorry, what was the.
TQM process system in our shop.
And it's performing very very well with past R. R.
Our year audits.
ISO 9001 and also the S 9100.
And we're very proud of what the team has done there and it's really starting to show a benefit in our.
Both to our customers and also to our our processes and our controls so.
I'd like to thank our team for what they've done there.
I'd also like to recognize our procurement team.
They've navigated you know this this mess that the supply chain change.
Dangers, saying globally, they've done a really good job.
And so.
They've been making sure that we've got the materials needed to fulfill our customers orders and they continue to look at critical stock inventories and where we're at we're getting products from them and they're doing a really good job on that.
I'd also like to recognize our HR. They are we've been able to identify and hire some.
Really good young talent, they're there, they're very alert and very aggressive and eager to learn.
And I'm really proud of what we're doing there as far as.
Bringing on some some fresh.
Fresh talent, that's going to.
Really help us.
Well do some wonderful things.
Going forward.
So if we look at but look at the business overall.
You see there's a strong demand for our tools not just manufacturing, but in the refurbishment side of the business.
We have the drill N ream as you all know it's it's it's a it's value as being.
Proven.
Every day day in day out and more and more customers are understanding that value.
We're seeing a very strong demand for that tool here in North America.
Our customers are when you when you look at our channel partner, there and DTI they've done a fantastic.
Fantastic job, there and there they continue to bring on new customers and continue to grow that business and.
And that's starting to show and where we're seeing a lot of a lot of new tool orders come in and.
They are bringing on new customers all of US every day and we're very proud of what they're doing.
If you look at the revenue and.
In North America.
I mean manufacturing our manufacturing team has done a fantastic job.
As we as we're now ask to produce them some very complicated parts.
That need to be very precise for certain types of drilling system is they're doing a wonderful job there.
You know our management team there is again identified some some great new talent that we're bringing into.
Two.
No support our existing team of.
Machinist and techs, there, they're doing a wonderful job there and we're seeing that we're seeing that really people are really notice and the quality that they put out an and.
Complicated parts, they they don't seem too.
They enjoy the challenge let me put it that way so that's really.
Becoming a very unique part of our business.
If you look at the P. D C refurbishment activity in both the drill N ream is as strong and the drill bits.
So.
Again, even though you know we look at the rig activity and those of you that have been with us since the since the start of this whole IPO process. When we went public two years ago.
We were at 2000 rigs close to it like 19, 1947 or something like that.
You know and so today when we're at 550 and as busy as we are it's.
It is it shows that the.
Rigs that are that are up and operating our drilling a lot of footage.
So they're doing it very quickly and very efficiently and and the demand on tools is high.
So you know again that the metrics that we always use that looking at the drill rig count.
To look at the production how productive how productivity is going to be going through our facility.
We're gonna be really busy or not and we've got a we've got to have a new look at that because service companies. As most of you are aware are very busy right now and then again our rig count is only 550 so.
In the U S.
We look at our international.
Part of our business.
Our team over there continues to knock down barriers and there is a lot of them.
We've made some some good penetration into some markets are tools are performing well.
We will you know its caught the attention of the extremely large service provider.
And they're liking how the performance of the tool is working and cutting.
Cutting time in days off of wells.
The wellbore quality, they have a lot of wellbore quality issues.
In the mid east.
Deal with different formations and and some very tough ones and they're finding the drilling ream is helping them out there and where we're starting to see that business over there grill for us we've got.
We've got a management team in there they've done a fabulous job, we've got even though were very small we've only got to you.
You know, we're a very small team over there they're doing a tremendous job in and we're starting to see some really good.
Penetrations into some markets and we're looking for some big things from from that team as we go forward.
You know, we're strengthening our relationships as we look at the service companies that we deal with.
In the energy sector, where you know there, they're the largest ones and where we're building a strong relationship with them. Every day. We you know we we go to work with the attitude of.
What's in what what else can we do for these companies where else do they need us and them.
We're starting to find that there's a lot of things that we can that we can.
Pull away from them and there's not really not pull away but.
Take that responsibility and make those parts and get them to them and we've seen that in the third quarter, we made a lot of new products.
Sure.
The service companies and.
And they are performing very very well so there's a lot more opportunity there and we can talk about that and and future opportunities.
But with that being said I'm going to go ahead and turn this over to Chris and he can you can start going over the numbers Chris.
Okay. Thank you Troy and welcome everyone.
We continue our review by turning to slide six.
We provide an overview of our revenue growth.
You can see that in Q3 revenue grew 5% sequentially.
And 130% year over year.
This was largely supported by our north.
North American business, where we have seen increases across the board as Troy alluded to.
And in all of our businesses drilling tool sales royalton repair fees higher contract services revenue.
Everything is progressing really nicely.
We are benefiting from an increasing rig count as we ended the quarter with them with an average U S rig count to 497 for the quarter up.
Up 10% from the second quarter of 2021.
And nearly double the level from the average in the third quarter of last year.
Of note the.
The U S rig count is in that mid 500 level that Troy mentioned, specifically on October $25 44, and as of last Friday 550.
Additionally, we are seeing higher demand for the drilling ream governance supports the efforts of operators to improve rig efficiencies.
That's the value proposition that we've demonstrated and continue to demonstrate.
We continue to be optimistic that the recovery that we have seen so far this year will continue at a steady pace and support growth in the fourth quarter as well as provide gnashed momentum as we head into 2022.
International revenue growth demonstrates growing market penetration, including our strengthened customer relationship that Troy just highlighted.
The international rig Count quarterly average has now increased over the last three quarters and that average was up 5% sequentially in Q and Q3.
Overall, our international revenue was up 14% sequentially.
22% year over year.
While this is not at the level of growth that we see in North America. We continue to see positive developments and are gaining traction with our strategy internationally.
We believe we are going to further penetrate these markets as we partner with global oilfield service companies and benefits from increased market activity as well as new product development efforts.
Now, let's turn to slide seven and take a little deeper look at tool and contract services revenue.
The year over year improvement in contract services reflects higher P. D C bit refurbishment work from an increasing rig count.
And the expansion of products, we manufacture for our long term legacy Parker.
Tool sales and rental revenue are up measurably since last year's quarter.
As our distributors drilling ream tool fleet, both expands and as upgraded with replacement tools.
However, sales were down slightly in the quarter $284000 sequentially.
Which does reflect the lumpy order pattern that we've seen with the recovery.
Troy will talk to the strength, we are seeing right now in neutral neutral orders in this quarter and when we followed up with opportunities.
Of note International revenue is also included in this revenue line item as we are running our tools in the middle East.
Other related tool revenue.
Which includes the drill N ream maintenance and repair fees as well as royalties was up $357000 or 31% sequentially.
This increase demonstrates the market demand for the drill N Ream and North America.
Now as you can see on slide eight we are maintaining our cost discipline as we've been able to effectively manage inflationary pressures.
While continuing to invest to support current and expected demand.
Like many others finding employees has not been easy and our teams are working hard around hiring and training or.
Our efforts regarding improving the onboarding process and leveraging our senior staff experience with new processes and quality management programs is paying off.
We've been able to fill the number of positions and move staffed up the learning curve.
Including specialized high in PDC bit appraisers.
So I think we will continue to be a focus area as we move forward.
In total third quarter operating expenses were up a modest three 5% sequentially.
Mostly due to cost of international sales.
As a result of our cost control efforts and given the higher demand in the market, we generated operating income of $163000 in the quarter.
The second straight quarter of positive operating income.
Further validating the progress we're making.
This compares with a significant operating loss in last year's comparable period.
We can see that further on slide nine when we look at our bottom line and adjusted EBITDA results, both of which have improved significantly over last year.
Our earnings per share was breakeven and adjusted EBITDA, which we use as a measure of operational performance was $853000 or 23.9% another strong EBITDA quarter for us.
These results clearly demonstrate the strong leverage we have on higher volume in this business.
Please see the supplemental slides at the back of this presentation deck that has the reconciliation table from.
GAAP net loss to non-GAAP adjusted EBITDA.
Now, let's close out 10, we highlight our balance sheet, which has continued to strengthen with lower debt levels. The company generated.
Generated 878000, almost $900000 in cash from operations.
The year to date period.
Our cash balance at the end of the quarter was two and a half million dollars.
Sure.
From $2 million at the end of 2020.
Long term debt, including the current portion at the end of the quarter was $2 6 million.
Which reflects a principal payment of 750000 made on the hard rock note during the quarter.
We now have just one remaining 750000 principal payment due on that note.
We're just payable next year in October. So that's October 2022 is the due date for that last principal payment.
Finally, after the quarter closed in October this year. The company completed an equity offering of one 7 million shares priced at $1 15 per share.
Resulting in net proceeds of approximately $1 $7 million.
We felt that the timing was appropriate to raise some capital to support our expected growth opportunities.
So with that I'm going to turn the presentation back to Troy to wrap up with a review of our outlook and opportunities.
Troy.
Thanks, Chris.
So as we go to slide 11, and we look at our opportunities going forward.
One of the things that.
But I'd like to mention is what we're going to continue to.
Bringing on some staffing we've got a lot of training of personnel that we're currently doing.
We've got a lot of maintenance that we've got to get done.
We've got.
As we look at the strong demand that's currently being placed on our manufacturing and PD.
PDC side of the business.
We will address that and we've got.
Like I said, some really good talent that we've brought on we're really happy with the with the how that they're picking up.
Some of the critical portions of our manufacturing.
So when we look at North America, we believe that we're going to have some great opportunities going forward as we like I was saying earlier we've identified.
Other product lines that we can pick up that fit in our wheelhouse.
When you look at when you look at the manufacturing or manufacturing capabilities.
We've got large machines that do vary that are capable of doing very complicated and precise parts.
And where we're identifying those all the time, we're still looking at diversification we've got some some.
Good things that we're doing there with me when we look at going in.
Away from the oil and gas sector too to bring in this diversification.
Portfolio into our company.
We're still going down that road and it's moving ahead very well.
International.
We've got a strong tool fleet over there now.
We've got a.
Fleet in multiple countries and we've got some some good strong performance going on in those countries and we've made some really strong allies with with some large service companies. So we're looking for international to really really show some good growth in <unk>.
In 2022.
So.
We will keep on plugging through this and.
I think our fourth quarter is going to be strong in the manufacturing and repair right now it is and I believe that it's going to continue to stay that way I do want you to understand that that's that's.
Usually what happens in an oil and gas industry, we usually see a slowdown in Q4 as it seems like rig drilled their quotas and we're not seeing that this year, we're seeing you know.
Customers demanding.
Repairs getting through our shop, and and ordering new tool so.
The typical lay down and slowdown of rigs this time of year is not happening.
So.
With that being said I'm going to go ahead and turn it over to questions and answers.
Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question. Kim you May press star two if you'd like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up.
On your handset before pressing the star keys, one moment, please while we poll for questions.
Thank you. Our first question comes from the line of <expletive> Ryan with Colliers Securities. Please proceed with your question.
Okay.
Thank you.
Hey, Troy, you mentioned kind of catching the attention of one large service provider internationally is this somebody new and can you expand on it a little bit or is this one of the major service providers that you had been working with that.
Is becoming a little more active.
Yes.
It is it is the largest service provider and.
We started working with them in to queue.
And.
Showing them the benefits of the drill N ream.
Product line.
On an international stage they they are.
They've used it here in the room are familiar with it here in the U S and they've enjoyed the benefits of it.
But when you go internationally as you know, it's it's like dealing with a whole new comer.
Company.
And.
We've been able to show them, some tremendous benefits with the drill N ream.
And they've now been giving us.
More and more rigs to two supply.
And where we're looking forward to some really good opportunity with them as the as we roll into 2022 and throughout 2022.
We've made them.
We've even made a few tools.
Custom for certain applications for them and it seems to be very beneficial for them.
Which countries are you now generating revenue from internationally.
We got Kuwait Oman.
The UAE.
The UAE, we still have a prop.
Process that we've got to go through.
That's.
Right now we're just we're analyzing the amount of work that will give us the first time and money its going to take us to two.
To bring on another quality system.
Hum.
We also have some tools in Iraq that that will be going in the hole, that's a new area for us that's.
That has some extremes challenges.
But if you look at.
Our traditional revenue has been coming from Kuwait.
And we brought on Oman.
Where we are now looking at our Saudi we're bringing tools that we're manufacturing and shipping tools there now.
And.
And then we also again have had the inventory ready to rock in the UAE.
So those those are the countries where we're currently in.
What challenges are.
Are there. If you are can you reach across these borders with service on repair or the app to be located in each one how is that shaking out.
So the challenge the biggest challenge. We currently have is still COVID-19 related they are still in a major locked down.
You know, we we were penetrating to eight very well up until <unk>.
Second quarter of last year, when they shut everything down.
And so when you see you May you may see 25 rigs shown in Kuwait, but.
It doesn't mean those 25 rigs are really drilling as efficiently as they can be drilling I mean, there theyre very short staffed.
And all of these countries. The Dx patch that have typically come from Canada from the U S from England.
To support these drilling efforts.
They're not willing to go through the <unk>.
Covid.
Criteria of going in and beyond.
You've got to isolate for two weeks you've got there.
There's a lot there's a lot of strengths that are still being placed on the workers over there. So when you look at 25 rigs into what Youre really seeing rigs that are probably performing about 50%.
And a lot of them have gone to just going to work over rigs.
Working over existing wells, because they cannot sign that the personnel to sit.
To drill.
So to keep these wells and to be able to drill 24 seven.
When we look at the challenges that we have going across borders we're doing we're getting better at that you know we're learning a lot about logistics and our team has done a really good job there as far as shipping tools.
In and out.
It doesn't seem to be the the hassle that it was just as we're getting more and more known over there.
Get people that are willing to participate and not just stall you and that's it.
Seems to happen a lot.
Things just take a long time and there's a lot of steps that you've got to take to get even the simplest things done.
But but we're finding ways around that and where we're getting a lot more efficient with that.
We can repair tools to to answer that part of your question.
We are still looking to put a repair facility in Dubai.
The issues that we have with that right now or we've identified our facility.
We're excited about getting moved in and getting we've got most of that equipment ready to go and be put in there.
We've just got to identify a team.
That.
And that can travel.
Travel in and out for training and still meet the Covid restrictions.
Better placed an even even in Dubai.
But we have got.
What we call a level one repair service can be done we do that in Kuwait we.
We do that in Oman.
And that's simply just checking the threads the connections on either end of the tool. We do imagine article test make sure Theres no cracks in the tool and this is all after the deal's been run we also have the adult grade.
The evaluation that takes place on these tools, we're able to have our team in Dubai and they can do grade tools in Oman, they can build great tools in Kuwait.
Our management to set up a really good.
Web based system, so that when we see the tool we can downgrade it right online.
That's working very efficiently.
So.
I think when we look at international and the challenges that we're going to face.
In 2022, it's it's it's mainly going to be Covid related.
The team is very well trained now and we've got some.
Some good offset results of the performance of our tool and we're ready to share that with.
With with.
Every drilling contractor over there so.
So it's the challenges well.
Would be still COVID-19 related.
Okay. Thanks, one.
One last one on contract services it.
It looks like Youre seeing expanded opportunities with Baker, what what could that mean as you look down the road.
If you look at contracted services, it's not just us doing.
Third party machine work, that's that's not what we want to be known as I mean, our team is extremely good at it making you know high quality complicated parts like we talked.
However, we identify those parts that add additional value to our organization. So we can take parts that we machine and the machine shop.
And then we take those over to the bit the PTC.
<unk> of our company, where we do the hard facing application. The brazing application just like it was if it.
The tool was coming into to be repaired. So when you. When you look at the the third party that that portion of our business, we're really doing a good job identifying those parts that we can turnkey new parts that we turnkey not just machine, but we turn.
Two the whole part they give us that part and they want that thing ready to go down the whole when we give it back to them. So it's a it's a.
Let's say.
Larger process and gives us a lot more opportunity to capture additional revenue.
And that's what we're identifying thats very exciting we take those parts that are machined and the machine shop, we take them over into the DTC side of the business, it's hard face that crazed its ground. It's inspected it's painted and it shipped as a complete turnkey part.
So theres a lot of opportunity there and I think you'll see it in 2022 as we start bringing on some additional service.
Companies that are that are really excited about the opportunity of us supporting our growth.
Okay, great. Thank you and congratulations on the good execution on the outlook going forward. Thanks.
Thank you.
Thank you. Our next question comes from the line of John Bair with ascend wealth Advisors. Please proceed with your question.
Thank you good morning, Troy and Chris.
Good morning morning, nice quarter.
Nice momentum Troy at the end of your prepared comments, you mentioned that youre not seeing the traditional fourth quarter slowdown by E&P companies and I'm wondering if you're also hearing from them.
Of perhaps a step up in their activities given the fact that our DUC inventory has been drawn down quite a bit.
Yes.
What we what we typically see is.
This started happening probably around.
So I would say you know what.
When we started really seeing some some drilling efficiencies.
And I'm going to say, it's been for the last 10 years, we would they have their drilling budget and theyre going to drill 36 wells with this rig and those wells should finish up sometime in December.
Because of the efficiencies that <unk> gained through not just the efficiencies.
Being able to pump more fluid down the hole to put more weight on on your your bottom hole Assembly two top drives what they have done.
Being able to figure out how to drill the curve all of these efficiencies every year has gotten better and better and better and so we'd always get to.
Typically we get about two October and they say well, we drilled our budget.
It's you know, where we're going to lay down rigs, but we'll we'll be looking to pick them back up in January.
Hmm.
This is this is not the story today and Thats like I say, it's been a long time since since ive heard of companies wanting to.
AD tools and in the fourth quarter and get ahead of the repairs in the fourth quarter our.
Typically they wait until January hits, and then a slam is hard.
But they're not they're not doing that this year so.
I think we're going to continue to see rig count climb I think it's gonna be a slow growth.
I think that the challenge that the industry has just like.
Every industry has right now is is finding personnel that can the can man those rigs and can can get those tools to the rig and conserve as those tools when.
When they come in from the field. So I think we're going to see a slow steady growth pattern.
Continuing through to the fourth quarter, because nobody can afford to lose hands right now and and so there they are keeping their personnel and they're keeping them busy and they're going to continue to drill and how they manage that budget I guess, we'll see come Q1, but.
But we're not seeing any slowdown at all I mean, we're we're extremely busy right now.
We had a we had a little bit of a breather first part of October it seemed like people were trying to catch up.
Our customers were trying to catch up and we were like Hey, what's going on.
And.
They have assured us that theres no slowdown on there and then and now we're starting to see.
We're starting to see that in our facility, where we're very busy with.
New products and also repaired products and they're asking us to do more and more and that's it.
That's very that's very nice to see this time of year.
So it sounds sort of like yeah.
Because of the labor issues, you can't really ramp up.
Rig count as fast as maybe they might want to.
Which is no big surprise it sounds like the that their drilling budget dollars are going farther because of the efficiencies of using your tool. So therefore, maybe they're looking ahead into the first quarter of 2022, and saying Hey, we want to get these tools lined up that we'd be able to use.
In activities is that kind of a way to look at it it.
It is a way to look at it and I think you know again, if you look at over the last 10 years and the step changes that we've made in drilling tools and drilling practices, you know, where we were able to take.
No days and weeks off of wells by changing things are offering new tools.
That is now those efficiency gains are now much smaller.
So you know, they're they're able to forecast our budget now.
Think when they forecasted their drilling budgets in 2021.
They were a lot more precise.
At knowing what they needed to to drill this and there wasn't those big efficiency gains that they've seen in years past their drilling.
Super efficient right now, but I think they they've captured all of those big games and it's to the point now where you know they're there they're pretty much drilling as fast as you can connect pipe.
And.
And so I don't know.
I just think you haven't seen a big efficiency gains throughout this year that are going to say Oh every well, we're now taking a week off of which means by the time, we get to October November December we drilled that we drilled our budget up so.
I think that.
Yeah. So I think that's what we're seeing.
Okay.
And I'm wondering.
Are any of your products, they're earning.
Materials that your manufacturing is there any capability or thought of utilize from three D printing to manufacture some of your stuff.
And then the last one would be any ability to raise prices for some of your products at all.
That's it for me.
Thanks, So so three D printing, we have we've looked at that you know when we look at.
The most of what we do is a very large parts and so you know.
To get that into a three D printing round theyre just not there yet you know small complicated stuff, but it's tough to machine three D. Printing works very well you know Scott that's 10 feet long and weighs 3500 pounds.
Not so much so.
We do look at three D printing.
We've got a very talented.
Group of.
I don't I don't like to call them machine. This I don't want to call them technicians, there a lot more than that.
Everyone, we have in our in our manufacturing facility they design.
They they they they run the CAD they run the Cam they they run all the post processors that they created.
These guys are very unique talented group of people and when they when they see something like that that they think that we can make better on a three D printer.
They bring it to our attention right now but.
To this point in time, we haven't we haven't been able to justify the three D printing process.
But we continue to look at it.
Sorry, what was your second question was just a any ability given that demand.
And in cost of raw materials, and so forth.
Any ability to raise prices on any or all of your of your services or the products.
Yes, I think what you're going to see is them throughout the industry is going to be in 2022.
The ability for the service companies to increase their prices.
Think the E&ps are all preparing themselves for it.
It has to happen I mean, when you when you look at when you look at still alone.
Since March there has been five price hikes on steel.
Just since March.
We're working on a <unk>.
Looking at turn 10 process for sort of a very large company and when we got evaluating this and what we could do it for and what their expectations were for us to do it for.
We were way.
We were way off there mark and when we realized that what they were going off of where we're still prices that.
Sure.
Nine months old we said no you got it you guys got to do it you've got a researcher still price is much better than that because they've gone up a lot. Since then so it's that's it's gone up so fast that even you know the people that are looking to have us start turnkey and product lines they need to understand the cost within their organizations.
Much better because it's it's rising so rapidly.
We've done a good job we've identified process is one of the things that we did that.
I'm Super excited for us.
We typically would get a big round bar stock of steel.
When we make the drilling ream tools and then we've got to do a lot of machining to to get the the near net shape.
That we finalize then start mill and all the the cutter locations into that and.
And we've been able to identify forgings now where we're able to.
To these large tools, we're able to get them into our process as matter of fact, the first ones are supposed to show up next week.
Saving us all kinds of time and so we're buying is still by the way, but we don't have to spend all of that time and when you look at the drilling ream tool, you're you're turning about 55% to 65% of that bar stock has turned into scrap chips.
And we're able to eliminate that time and the money that it takes to buy.
That bar, we're able to really efficiently get what we need in our door and spend a lot less time machine units.
We're excited to see how that benefits the company I think it's going to I think it's going to benefit us greatly.
Great. Thanks for taking my questions.
You bet.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from line of John Sturges with Oppenheimer and company. Please proceed with your question.
Nice progress gentlemen.
I'm, just curious I didnt see an R&D line in.
And in the press release and I was just curious I know you probably didn't do a lot.
You know the past 18 months.
But just curious.
Is that area picking up for you doing your own no.
We still intend on getting our R&D going you know we've got that strider tool that we've talked about for years, it's so close and we've got it.
Tubing strider, it's it's a it's a product that we're looking forward to getting out there, but John the biggest issue that we have right now as we've had to totally take our R&D team and put them into our manufacturing to support what we've got going on there up until we get individuals' trained.
You know we've got some some great things that we're looking to to still do with R&D. We've got a list of products. We think that you know the oilfield could very much use.
We have bought some power sections for metal on metal power sections, which is going to really be that step change in.
In technology for us.
Downhole motor performance and we were.
We brought those units in and we're ready to do some modifications on those units to plug them into our strider tool to take that to where its at at that tool can generate a lot higher margins. We just had been short handed and are the guys in R&D.
But no it's a skeleton crew.
They are top notch and we need we need them right now too.
To support the demand on our on our manufacturing.
We've got things.
We look at.
Becoming more efficient right as we're doing more and more repairs. All the time, we've got to find ways to do it much better so.
Just because we don't we don't have that guy in R&D looking at you know, finishing that that that strider part line.
He is actually right now we've got a team in building a sandblasting systems within our operations and Bernal to make that much more efficient. So the traditional you know bring them in and parts wash them and put them into a <unk>.
Media Blasters, it's totally changing with it.
We've got we've got two rooms constructed we're building the railing systems in those rooms.
So that when these trucks come in with these heavy long tools, we manage them with this railing system, we bring them in we do the media blast much more efficiently and we eliminate the whole parts washing section of that procedure.
So the R&D group is busy just supporting it.
And making us more efficient, but also supporting making sure that we're that we're getting the tools out there that our customers are demanding we get out.
But we'll we'll get back into R&D I would imagine it's gonna be sometime.
Looking at second quarter.
2022.
I'm really hoping by then we've staffed up when we've trained well enough.
We can pull.
Couple of these individuals' back in and finish up that that strider.
Strider product line and then get on to the next one right.
Right.
That was good color I appreciate it.
Beth.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Meyer for any final comments.
I just want to say thanks, everyone for taking the time to join us today.
Uh huh.
We're excited about what's going on and we're excited what 2022 is going to bring.
And to.
I look forward to visiting with everybody.
In March I I'm.
I think we've got a good runway ahead of us.
So.
With that being said, thank you very much and.
Appreciate you all attending.
Wonderful weekend.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.