Summary of Drilling Tools International (DTI) Conference Call Company Overview - **Company Name**: Drilling Tools International (DTI) - **Industry**: Oil and Gas - **Core Business**: Provider of rental and service solutions for the oil and gas industry, specializing in downhole tools such as drill strings, motors, and stabilizers [2][3] Key Points and Arguments Business Model - DTI operates under a business model focused on the "three R's": rental, repair, and recovery, which allows for a unique position in the rental landscape [4][5] - The company has a significant market share of 50-60% in both onshore and offshore rigs in the U.S. and Canada [4][6] Financial Performance - Despite a declining rig environment, DTI reported solid EBITDA margins and adjusted free cash flow for 2025 [5][6] - The company has completed four M&A transactions in the last 12-18 months, contributing to its financial resilience [6][14] Customer Base and Rental Strategy - DTI's rental strategy is supported by a diverse customer base, including global clients, which allows for geographic expansion [10][26] - The company maintains a large inventory of over 65,000 tools, making it inefficient for E&P operators to own all tools [8][10] Manufacturing and Repair Capabilities - DTI has in-house manufacturing and repair facilities, which enhance its operational efficiency and reduce reliance on external suppliers [11][12] - The company utilizes a proprietary software system, Compass, for rental tool management, providing traceability and data-driven decision-making [12][13] Capital Allocation and M&A Strategy - DTI is focused on thoughtful capital allocation, with options including CapEx, M&A, debt repayment, share repurchase, or dividends [16][17] - The company views M&A as integral to its growth strategy, targeting technology with intellectual property, geographic expansion, and accretive earnings [24][25][30] Recent Acquisitions - DTI has made several strategic acquisitions, including: - **Deep Casing Tools**: Expanded patent portfolio and exposure to Middle East and Asia Pacific [30] - **Superior Drilling Products**: Enhanced market share and IP for the Drill N Ream tool [32] - **European Drilling Projects**: Acquired a unique stabilizer tool, leading to significant business growth [34] - **Titan Tools**: Strengthened presence in the UK North Sea and onshore Europe [36] Market Trends and Future Outlook - DTI is experiencing a strong buyers' market for M&A opportunities, with a large pipeline of potential acquisitions [28][29] - The company is optimistic about its growth trajectory in the Eastern Hemisphere, which has grown to 14% of revenue [39] Additional Important Information - DTI's adjusted free cash flow margins are expected to remain strong despite industry headwinds, supported by customer-funded maintenance CapEx [18][20] - The company has a high insider ownership structure, which aligns management interests with those of shareholders [22] This summary encapsulates the key insights from the DTI conference call, highlighting the company's strategic focus, financial performance, and growth opportunities within the oil and gas industry.

Core Viewpoint - Drilling Tools International Corporation (DTI) is conducting its Q2 2025 earnings conference call to discuss financial results and future outlook [1][2][3]. Group 1: Company Overview - The conference call is hosted by Ken Dennard, with participation from CEO Wayne Prejean and CFO David Johnson [3][4]. - The call includes a review of second quarter results and the 2025 outlook, followed by a Q&A session [4]. Group 2: Conference Call Details - The call is recorded and will be available for replay on the company's website and via telephonic recorded replay until August 21, 2025 [4]. - Forward-looking statements will be made during the call, reflecting the current views of DTI's management, but actual results may differ due to various risks and uncertainties [5].

[PART I: Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Statements%20(Unaudited)) This section details the company's unaudited financial statements, management's analysis, market risks, and internal controls [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company presents its unaudited condensed consolidated financial statements, reporting a 10% revenue increase to **$82.3 million** but a net loss of **$4.1 million** for the first half of 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$230.3 million** as of June 30, 2025, driven by acquisitions, while total liabilities rose to **$107.8 million** and shareholders' equity slightly increased | | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | **Total Current Assets** | $66.1 | $68.1 | | **Total Assets** | $230.3 | $222.4 | | **Total Current Liabilities** | $32.0 | $31.0 | | **Revolving line of credit** | $33.1 | $27.1 | | **Total Liabilities** | $107.8 | $102.5 | | **Total Shareholders' Equity** | $122.5 | $120.0 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total revenue increased **10.5%** to **$82.3 million** for the six months ended June 30, 2025, but the company reported a net loss of **$4.1 million** due to increased expenses and a goodwill impairment | | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | **Total revenue, net** | $82.3 | $74.5 | | Tool rental | $67.3 | $58.3 | | Product sale | $15.0 | $16.2 | | **Total costs and other deductions** | $85.8 | $70.2 | | Goodwill impairment | $1.9 | $0.0 | | **Net income (loss)** | $(4.1) | $3.5 | | **Diluted earnings (loss) per share** | $(0.11) | $0.12 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities remained stable at **$4.6 million**, while investing activities decreased to **$12.1 million** and financing activities significantly declined to **$2.4 million** | | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | **Net cash flows from operating activities** | $4.6 | $4.4 | | **Net cash flows from investing activities** | $(12.1) | $(26.7) | | **Net cash flows from financing activities** | $2.4 | $23.5 | | **Net change in cash** | $(5.0) | $0.8 | | **Cash at end of period** | $1.1 | $6.8 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail significant accounting policies, recent acquisitions, segment realignment, a **$1.9 million** goodwill impairment, and the initiation of a share repurchase program - The company completed four acquisitions: Casing Technologies Group (CTG) on March 15, 2024; Superior Drilling Products (SDPI) on July 31, 2024; European Drilling Projects (EDP) on October 3, 2024; and Titan Tools Group on January 2, 2025[23](index=23&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - In January 2025, the company realigned its operations into two reportable segments: Eastern Hemisphere and Western Hemisphere. This change was made to support strategic initiatives to expand global operations[90](index=90&type=chunk) - The segment realignment triggered a goodwill impairment test, resulting in a non-cash impairment loss of **$1.9 million** during the six months ended June 30, 2025[134](index=134&type=chunk) - On May 13, 2025, the company announced a share repurchase program for up to **$10.0 million**. During the quarter, **202,611 shares** were repurchased for **$0.6 million**[181](index=181&type=chunk)[182](index=182&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 10% revenue growth driven by acquisitions, the shift to a net loss, and market headwinds, while affirming liquidity Six Months Ended June 30, 2025 vs 2024 | | 2025 (in millions) | 2024 (in millions) | $ Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total revenue, net** | $82.3 | $74.5 | $7.8 | 10% | | Western Hemisphere Revenue | $78.8 | $73.9 | $4.9 | 7% | | Eastern Hemisphere Revenue | $11.1 | $5.4 | $5.7 | 105% | | **Net income (loss)** | $(4.1) | $3.5 | $(7.6) | -217% | | **Adjusted EBITDA** | $20.1 | $19.9 | $0.2 | 1% | - Revenue growth was driven by acquisitions, particularly in the Eastern Hemisphere, which saw a **105% increase** in revenue for the six-month period[194](index=194&type=chunk)[202](index=202&type=chunk) - The swing to a net loss was primarily due to a **$2.5 million** increase in depreciation and amortization, a **$1.7 million** increase in net interest expense, and a **$1.9 million** goodwill impairment charge[194](index=194&type=chunk) - The company is experiencing market headwinds, including declining rig counts. The weekly average Western Hemisphere rig count was **881** for H1 2025, down from **946** in H1 2024. The Eastern Hemisphere rig count was **719**, down from **760**[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies credit, concentration, foreign currency, and inflation as primary market risks, noting significant customer concentration and unhedged FX exposure - The company has significant customer concentration, with two customers representing **27% of revenue** for the six months ended June 30, 2025[56](index=56&type=chunk) - Foreign exchange risk is growing due to expansion in international markets. The company does not currently hedge this exposure[229](index=229&type=chunk)[230](index=230&type=chunk) - Rising international tariffs and inflation are identified as risks that could materially and adversely affect business, financial condition, and results of operations[231](index=231&type=chunk)[232](index=232&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to a continued material weakness in internal control over financial reporting - As of June 30, 2025, the Company's disclosure controls and procedures were deemed **ineffective** by management[235](index=235&type=chunk) - The ineffectiveness is due to a continued material weakness related to ineffective monitoring activities to assess the operation of internal control over financial reporting[236](index=236&type=chunk) [PART II: Other Information](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and other relevant disclosures [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, with no specific material litigation disclosed - The company may become involved in various legal proceedings in the ordinary course of its business. Refer to Note 15 for further details on commitments and contingencies[166](index=166&type=chunk)[240](index=240&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K have been identified - No material changes to the risk factors from the Annual Report as of the date of this Quarterly Report have been identified[241](index=241&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company initiated a **$10.0 million** share repurchase program, repurchasing **202,611 shares** for **$0.6 million** in Q2 2025 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | May 2025 | 61,528 | $2.60 | $0.2 | | June 2025 | 141,083 | $3.17 | $0.4 | | **Total** | **202,611** | **$3.00** | **$0.6** | - The company remains authorized to purchase an additional **$9.4 million** worth of common shares under the current repurchase program[242](index=242&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) A Rule 10b5-1 trading plan was adopted by an executive to sell up to **125,000 shares** over a 15-month period - Michael Domino, President of the Directional Tool Rentals Division, adopted a Rule 10b5-1 trading plan on May 16, 2025, to sell up to **125,000 shares** over 15 months[246](index=246&type=chunk)[247](index=247&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for the second quarter grew nearly 5% year-over-year, reaching $39.4 million, while adjusted EBITDA increased by 4% to $9.3 million [6][14] - Adjusted free cash flow was positive for the first time since the company went public, amounting to $1.8 million [7][17] - The company reported a net debt of $55.8 million and cash and cash equivalents of approximately $1.1 million at the end of the second quarter [14] Business Line Data and Key Metrics Changes - Tool rental revenue was approximately $32.8 million, while product sales revenue was $6.7 million, reflecting a drop in deep casing sales due to market conditions [14][15] - The Eastern Hemisphere operations saw a revenue increase of 21%, contributing about 14% of total revenue in the first half of the year [9][16] - The deep casing product line experienced significant softness due to rig declines in the Middle East and Mexico [7][15] Market Data and Key Metrics Changes - The global rig count declined by 7% year-over-year, impacting overall market activity levels [13] - Despite the decline in rig counts, the company managed to maintain operational discipline and benefited from recent acquisitions [13][19] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions and enhancing operational efficiency through a program called "One DTI" [22][23] - A cost reduction program was implemented to cut expenses by $6 million annually, aligning spending with customer activity levels [11][19] - The company is actively pursuing strategic acquisitions to enhance its competitive position and expand its geographic footprint [27][55] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that while pricing pressures are expected, the company is well-positioned to adapt to market changes [25][26] - The company anticipates continued uncertainty in the market, but remains confident in its ability to deliver shareholder value [25][27] - Management highlighted the importance of maintaining strong communication with clients to navigate pricing pressures effectively [44] Other Important Information - The company repurchased $600,000 of its common stock during the second quarter at an average price of $3 per share [20] - Maintenance capital expenditures for the second quarter were approximately 10% of total revenue, primarily funded by tool recovery revenue [18] Q&A Session Summary Question: How did the company maintain margins despite rig count declines? - Management indicated that they anticipated activity declines and pricing pressures, which were somewhat muted in the first half of the year, allowing margins to hold up [30][31] Question: Will the cost cuts fully impact Q2, or will benefits be seen in Q3 and Q4? - Management stated that more benefits from cost cuts are expected in Q3 and Q4, as the cuts were just being implemented in Q2 [33] Question: What factors will determine the company's position within the guidance range for the year? - The activity level and pricing pressure will significantly impact whether the company reaches the low or high end of its guidance range [36] Question: What drove the sequential international revenue growth this quarter? - Management attributed growth to positive momentum from recent acquisitions and successful re-establishment in the Eastern Hemisphere market [37][39] Question: What is the company's exposure to Western Canada and gas markets in the US? - The company has a solid presence in the Haynesville and Northeast markets, with a strong business in Canada [48][49] Question: Have margins eroded in Q3, and what is the outlook for Q4? - Management acknowledged that while Q1 and Q2 were on plan, they expect pricing pressure to continue impacting margins in Q3 and Q4 [52] Question: What is the current M&A environment like? - Management noted ongoing discussions with potential acquisition targets and emphasized the importance of finding good value in the current cycle [54][55]

Financial Performance & Growth - DTI's Q2 2025 revenue reached $3942 million, reflecting a 5% quarter-over-quarter increase despite a 7% global rig count decline[14,147] - The company reported a 259% quarter-over-quarter increase in Adjusted Free Cash Flow in Q2 2025[42] - DTI anticipates revenue between $145 million and $165 million for FY 2025[99] - Adjusted EBITDA for FY 2025 is projected to be between $32 million and $42 million, with Adjusted Free Cash Flow ranging from $14 million to $19 million[99] Strategic Initiatives & Expansion - DTI expanded its ABL Credit Facility from $60 million to $80 million and added a $25 million term loan maturing in March 2029[43] - The company has grown its portfolio from 2 to 16 patented products, supported by approximately 150 active patents[43] - DTI's Western Hemisphere operations contributed 86% of Q2 2025 revenue, while the Eastern Hemisphere accounted for 14%[14] - The company expects to double revenue contribution from the Eastern Hemisphere in FY 2025[100] Capital Allocation & M&A - DTI authorized a $10 million share repurchase program and repurchased approximately $600 thousand of DTI common stock during Q2 2025[46] - The company achieved 100% of the $45 million in previously announced SDPI synergies by August 2025 and identified additional synergies[60]

Company Performance - Drilling Tools International Corp. (DTI) reported a quarterly loss of $0.02 per share, missing the Zacks Consensus Estimate of $0.04, and compared to earnings of $0.10 per share a year ago, representing an earnings surprise of -150.00% [1] - The company posted revenues of $39.42 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 1.04%, but showing an increase from year-ago revenues of $37.53 million [2] - Over the last four quarters, DTI has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - DTI shares have lost approximately 38.8% since the beginning of the year, contrasting with the S&P 500's gain of 9.6% [3] - The current consensus EPS estimate for the coming quarter is $0.02 on revenues of $37.33 million, and for the current fiscal year, it is $0.08 on revenues of $156.01 million [7] Industry Outlook - The Oil and Gas - Field Services industry, to which DTI belongs, is currently ranked in the bottom 15% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact DTI's stock performance [5][6]

[Executive Summary & Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Outlook) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Drilling Tools International Corp. (DTI) reported its second quarter 2025 financial results, highlighting consolidated revenue, net loss, and key adjusted performance metrics | Metric | Q2 2025 | | :--- | :--- | | Total Revenue | $39.4 million | | Tool Rental Revenue | $32.8 million | | Product Sales Revenue | $6.7 million | | Net Loss | ($2.4 million) | | Adjusted Net Loss | ($0.7 million) | | Diluted EPS | ($0.07) | | Adjusted Diluted EPS | ($0.02) | | Adjusted EBITDA | $9.3 million | | Adjusted Free Cash Flow | $1.8 million | | Net Debt (as of June 30, 2025) | $55.8 million | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlights Q2 2025 performance exceeding forecasts despite market headwinds, driven by diversified geographic growth and ongoing cost-cutting initiatives - Q2 performance was solid despite lower commodity prices and rig count reductions in the US, exceeding internal forecasts and marking the first positive Adjusted Free Cash Flow for a second quarter since going public[4](index=4&type=chunk) - Recent acquisitions have diversified the company's geographic footprint, with the Eastern Hemisphere segment's revenue growing **46% quarter-over-quarter**, now contributing approximately **14% of total revenue**[5](index=5&type=chunk) - Despite market softness, consolidated Revenue and Adjusted EBITDA grew by **5%** and **4% year-over-year**, respectively[5](index=5&type=chunk) - The company is implementing a program to cut expenses by approximately **$6 million** in 2025 to align with customer activity levels and is on track to meet or exceed this goal[6](index=6&type=chunk) [Full Year 2025 Outlook](index=1&type=section&id=Full%20Year%202025%20Outlook) DTI maintains its full-year 2025 guidance, projecting revenue and Adjusted EBITDA ranges amidst anticipated market uncertainty and pricing pressures | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $145 million | $165 million | | Adjusted EBITDA | $32 million | $42 million | | Adjusted EBITDA Margin | 22% | 25% | | Adjusted Free Cash Flow | $14 million | $19 million | [Financial Statements](index=3&type=section&id=Financial%20Statements) [Consolidated Statements of Comprehensive Income (Loss)](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company's comprehensive income statements show Q2 2025 revenue growth driven by tool rentals, alongside a net loss due to increased costs and a goodwill impairment charge year-to-date Q2 Performance (Three Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $39,421 | $37,533 | +5.0% | | Tool Rental Revenue | $32,756 | $28,328 | +15.6% | | Product Sale Revenue | $6,665 | $9,205 | -27.6% | | Net Income (Loss) | $(2,407) | $365 | N/A | | Diluted EPS | $(0.07) | $0.01 | N/A | YTD Performance (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $82,301 | $74,507 | +10.5% | | Goodwill Impairment | $1,901 | $0 | N/A | | Net Income (Loss) | $(4,076) | $3,492 | N/A | | Diluted EPS | $(0.11) | $0.12 | N/A | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, DTI's balance sheet shows a slight increase in total assets, a significant decrease in cash, and a rise in total liabilities primarily from increased revolving credit | Balance Sheet Item (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash | $1,145 | $6,185 | | Total Current Assets | $66,134 | $68,076 | | Total Assets | $230,279 | $222,431 | | Revolving line of credit | $33,140 | $27,142 | | Total Liabilities | $107,757 | $102,472 | | Total Shareholders' Equity | $122,522 | $119,959 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, DTI generated positive operating cash flow, but significant investing activities, including acquisitions and capital expenditures, led to a net decrease in cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $4,626 | $4,393 | | Net cash from investing activities | $(12,141) | $(26,728) | | Net cash from financing activities | $2,448 | $23,495 | | Net change in cash | $(5,040) | $783 | | Cash at end of period | $1,145 | $6,786 | [Non-GAAP Financial Measures and Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Definitions of Non-GAAP Measures](index=7&type=section&id=Definitions%20of%20Non-GAAP%20Measures) The company defines its non-GAAP financial measures, including Adjusted EBITDA, Adjusted Free Cash Flow, Net Debt, and Adjusted Net Income (Loss), which are used to provide supplemental insights into ongoing operational performance - Adjusted EBITDA is defined as net earnings (loss) before interest, taxes, depreciation, and amortization, further adjusted for items like goodwill impairment, stock-based compensation, and transaction costs[22](index=22&type=chunk) - Adjusted Free Cash Flow is defined as Adjusted EBITDA less Gross Capital Expenditures[8](index=8&type=chunk)[24](index=24&type=chunk) - Adjusted Net Income (Loss) excludes items such as goodwill impairment, restructuring charges, and transaction costs to better reflect ongoing performance[26](index=26&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) DTI provides detailed reconciliations from GAAP to non-GAAP measures, including Adjusted EBITDA, Adjusted Net Income (Loss), and full-year outlook projections [Reconciliation to Adjusted EBITDA and Adjusted Free Cash Flow](index=8&type=section&id=Reconciliation%20to%20Adjusted%20EBITDA%20and%20Adjusted%20Free%20Cash%20Flow) Q2 2025 saw Adjusted EBITDA increase and Adjusted Free Cash Flow significantly improve, primarily due to reduced capital expenditures, with year-to-date figures also provided Q2 Reconciliation Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(2,407) | $365 | | Adjusted EBITDA | $9,332 | $8,965 | | Adjusted Free Cash Flow | $1,781 | $(1,119) | [Reconciliation to Adjusted Net Income (Loss)](index=10&type=section&id=Reconciliation%20to%20Adjusted%20Net%20Income%20%28Loss%29) Q2 2025 Adjusted Net Loss was **$0.7 million** or **($0.02) per diluted share**, after accounting for various adjustments, compared to an Adjusted Net Income in the prior year Q2 Adjusted Net Income (Loss) (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(2,407) | $365 | | Adjusted Net Income (Loss) | $(726) | $2,968 | | Adjusted Diluted EPS | $(0.02) | $0.10 | [Reconciliation of Full Year 2025 Outlook](index=11&type=section&id=Reconciliation%20of%20Full%20Year%202025%20Outlook) The full-year 2025 outlook reconciles the projected Net Loss to the Adjusted EBITDA and Adjusted Free Cash Flow guidance, detailing key adjustments FY 2025 Outlook Reconciliation (in thousands) | Metric | Low Range | High Range | | :--- | :--- | :--- | | Estimated Net Loss | $(8,500) | $(3,000) | | Adjusted EBITDA | $32,000 | $42,000 | | Adjusted Free Cash Flow | $14,000 | $19,000 |

Core Insights - Drilling Tools International Corp. (DTI) reported total consolidated revenue of $39.4 million for Q2 2025, with tool rental revenue at $32.8 million and product sales at $6.7 million [2][3] - The company experienced a net loss of approximately $2.4 million for the quarter, with an adjusted net loss of $725,000 [2][3] - DTI's adjusted EBITDA for Q2 was $9.3 million, marking a 4% increase compared to Q2 2024, despite market softness [4][6] Financial Performance - DTI's Q2 2025 revenue increased by 5% compared to Q2 2024, while adjusted EBITDA rose by 4% [4][6] - The company achieved its first positive adjusted free cash flow for any second quarter since going public, amounting to $1.8 million [3][4] - As of June 30, 2025, DTI had approximately $1.1 million in cash and cash equivalents, with net debt of $55.8 million [2][3] Market Conditions - The second quarter was impacted by lower commodity prices, leading to a reduction in rig count and customer activity, particularly in the US land market [3][5] - Despite the decline in activity, DTI's performance remained solid, with a 46% revenue growth in the Eastern Hemisphere segment, contributing 14% of total revenue [4][5] - The company anticipates continued uncertainty in the market, prompting a $6 million expense reduction program to align spending with customer activity levels [5][6] Outlook - DTI maintains its full-year 2025 revenue guidance of $145 million to $165 million, with adjusted EBITDA expected to range from $32 million to $42 million [6][29] - The adjusted EBITDA margin is projected to be between 22% and 25% for the year [6][29] - The company is committed to identifying cost reduction opportunities and maintaining operational flexibility in response to market challenges [5][6]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Drilling Tools International Corp. (DTI) despite higher revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.04 per share, reflecting a 60% decrease year-over-year, while revenues are projected to be $39.84 million, a 6.2% increase from the previous year [3]. - The consensus EPS estimate has been revised down by 90% over the last 30 days, indicating a significant reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, suggesting no recent differing analyst views [12]. - The stock currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [13]. Historical Performance - In the last reported quarter, DTI was expected to post earnings of $0.04 per share but only achieved $0.02, resulting in a surprise of -50% [14]. - Over the past four quarters, the company has beaten consensus EPS estimates twice [15]. Market Reaction Factors - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [16]. - While DTI does not appear to be a strong candidate for an earnings beat, investors should consider additional factors before making investment decisions [18].

Core Viewpoint - Drilling Tools International Corp. (DTI) is set to report its second quarter financial results for 2025 on August 14, 2025, with a live conference call available for stakeholders [1][2]. Company Overview - DTI is a leading oilfield services company based in Houston, Texas, specializing in the manufacturing and rental of downhole drilling tools for horizontal and directional drilling of oil and natural gas wells [3]. - The company has been operational since 1984 and has a network of 15 service and support centers in North America, along with 11 international centers across the EMEA and APAC regions [3].