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].

Summary of Drilling Tools International (DTI) Conference Call Company Overview - **Company Name**: Drilling Tools International (DTI) - **Ticker Symbol**: DTI - **CEO**: Wayne Prejean - **Industry**: Oil and Gas Equipment Rental Key Financial Highlights - **Q1 Revenue**: Approximately $42.9 million, representing a 16% quarter-to-quarter increase [6] - **Geographic Revenue Distribution**: 89% from the Western Hemisphere and 11% from the Eastern Hemisphere [6] - **2025 Financial Outlook**: Expected adjusted free cash flow between $14 million and $19 million [28] Business Model and Operations - **Primary Business**: Rental tools for drilling, completion, and production in the oil and gas sector [8] - **Customer Base**: Focus on oil and gas companies and service companies, with minimal rentals to drilling contractors [9] - **Product Offerings**: Includes downhole tools, drill pipe, BHA components, and completion tools [11][12] - **Manufacturing Locations**: Facilities in Brewster, Louisiana; Vernal, Utah; and NISQ Canada, with partnerships in Asia, Europe, and the Middle East [13] Technology and Innovation - **Asset Management System**: Introduction of the Compass system for order management and transparency [14] - **Acquisitions**: Four acquisitions in nine months, expanding product offerings from 2 to 16 patented products [15] Market Dynamics and Strategy - **Market Conditions**: Acknowledgment of market volatility due to tariffs and OPEC+ actions, leading to a cautious capital spending environment among oil companies [38][39] - **Growth Strategy**: Focus on mergers and acquisitions (M&A) to consolidate and grow in a fragmented industry [20][29] - **Geographic Expansion**: Plans to increase Eastern Hemisphere revenue contribution from 1% in 2023 to an expected 16% in 2025 [27] Financial Management and Capital Allocation - **Capital Allocation Priorities**: Balancing debt reduction, share buybacks, and M&A opportunities based on market conditions [46] - **Share Repurchase Program**: Authorized a $10 million share repurchase program to enhance shareholder value [16][17] Competitive Landscape - **Market Position**: DTI leads in several downhole tool categories, with a competitive landscape consisting of a few substantial players and many smaller suppliers [50][51] - **Differentiation**: Emphasis on technology deployment and customer-centric focus to maintain competitive advantage [14][29] Conclusion - **Resilience and Future Outlook**: Despite current market challenges, DTI remains committed to growth through strategic initiatives and maintaining a strong balance sheet [54]

Company Overview - Drilling Tools International Corp. (DTI) is a global oilfield services company specializing in the design, engineering, manufacturing, and rental of tools for onshore and offshore horizontal and directional drilling operations [1][4] - The company has a history dating back to 1984 and operates 15 service and support centers in North America, along with 11 international centers across the EMEA and APAC regions [4] Conference Participation - DTI will participate in the Sidoti & Company June 2025 Small-Cap Virtual Conference on June 11-12, 2025 [1] - The company will webcast its investor presentation on June 12th at 12:15 PM EDT, with free registration available [2] - Management will also conduct virtual one-on-one meetings with investors during the conference [2] Investor Relations - A copy of the investor presentation will be available on the Investor Relations section of DTI's website [3] - A replay of the webcast will be archived on the company's Events and Presentations page following the event [3]

Revenue Performance - Total revenue for the three months ended March 31, 2025, was $42.88 million, a 16% increase from $36.97 million in the same period of 2024[190] - Tool rental revenues accounted for 81% of total revenues, while product sales contributed 19%, consistent with the previous year[180] - Western Hemisphere revenue increased by $2.89 million, or 8%, to $41.2 million, driven by the addition of the Diamond Products Division[191] - Eastern Hemisphere revenue surged by $3.8 million, or 305%, to $5.1 million, primarily due to acquisitions in the rental business[192] - 29.0% of total revenue in Q1 2025 was generated from two customers, slightly down from 30.0% in Q1 2024[216] Operating Income and Expenses - Total operating income decreased by 36% to $3.3 million, impacted by rising corporate expenses and interest costs[190] - Interest expense rose significantly by 619% to $1.3 million, attributed to new loans and credit facility draws[194] - Adjusted EBITDA for the three months ended March 31, 2025, was $10.75 million, slightly down from $10.89 million in the prior year[199] Cash Flow and Liquidity - Cash and cash equivalents stood at $2.8 million as of March 31, 2025, with sufficient liquidity expected for the next 12 months[200] - Net cash provided by operating activities for Q1 2025 was $2.4 million, down from $3.3 million in Q1 2024, driven by a net loss of $1.7 million[206] - Net cash used in investing activities for Q1 2025 was $7.3 million, including $5.0 million for property, plant, and equipment purchases and $5.6 million for the acquisition of Titan[207] - Net cash provided by financing activities for Q1 2025 was $1.4 million, compared to a net cash outflow of $24.6 million in Q1 2024[209] Market Conditions - The average U.S. rig count in the Western Hemisphere decreased to 930 from 995 year-over-year, while the Eastern Hemisphere count increased to 757 from 725[187] - U.S. oil production reached a record high of 13.5 million barrels per day, but crude oil prices fell from $78.41 to $71.84 per barrel[186] Risks and Challenges - Cash and cash equivalents may exceed insurance limits, posing a concentration risk[215] - The company has not entered into hedging arrangements to mitigate foreign currency exchange rate fluctuations, which may impact future cash flows[217] - Rising international tariffs could adversely affect the company's business and results of operations[219] - The company has established a cybersecurity incident response plan, but there is no assurance that it will fully mitigate cybersecurity risks[222]

Financial Data and Key Metrics Changes - The company reported a 16% year-over-year revenue growth and an 8% increase compared to the fourth quarter of 2024 [6][12] - Adjusted EBITDA grew nearly 18% year-over-year and remained flat sequentially [7] - Total consolidated revenue for the first quarter was $42.9 million, with tool rental revenue of approximately $34.5 million and product sales revenue of $8.3 million [12] - Adjusted free cash flow for the first quarter was $5.7 million, with net debt of $52.1 million [12][13] - The company recorded a noncash goodwill impairment of approximately $1.9 million, which does not affect day-to-day operations or liquidity [13] Business Line Data and Key Metrics Changes - The Western Hemisphere segment, which includes directional tool rentals and wellbore optimization tools, remained steady [14] - The Eastern Hemisphere segment, which includes deep casing tools and European drilling projects, showed some volatility, but tool rental revenue increased significantly compared to Q1 of 2024 [15] - The decline in product sales was primarily attributed to deep casing tools, which are expected to see increased demand in 2025 as customer-owned inventory depletes [15] Market Data and Key Metrics Changes - Despite a 6% global rig count decline, the company managed to increase revenue, validating its M&A strategy to strengthen its business model [12] - The Eastern Hemisphere accounted for 11% of total revenue in Q1, with expectations for growth as the year progresses [16] Company Strategy and Development Direction - The company is executing a two-phase strategy to manage potential disruptions in order flow due to market volatility [7] - A share buyback authorization of up to $10 million has been approved, reflecting confidence in the stock's value [11] - The company is focused on cost reduction measures, anticipating $6 million in annual savings [18] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about increased volatility and uncertainty in the marketplace due to tariffs and potential recession impacts [7] - The company has adjusted its 2025 revenue guidance to a range of $145 million to $165 million, with adjusted EBITDA expected between $32 million and $42 million [19] - Management remains optimistic about the demand for complex wellbore solutions and believes that their differentiated technology will provide value to clients [22] Other Important Information - The company is maintaining its planned capital expenditures to support growth in its RotoShear product line and international expansion [16] - Maintenance capital expenditures were approximately 10% of total revenue, reflecting a trend of lower investment due to declining rig counts [17] Q&A Session Summary Question: How is the company maintaining free cash flow in a challenging environment? - Management highlighted cost reductions and strategic CapEx management to preserve EBITDA margins [26][29] Question: What is the outlook for the Eastern Hemisphere, particularly in Saudi Arabia? - Management noted flat conditions in the Middle East but mentioned that they are gaining traction in other areas despite rig count softness [30][32] Question: How does the company view the North American market for the back half of the year? - Management anticipates some softness in the U.S. market but noted that Canadian operations may be more resilient [40][42] Question: Can you elaborate on the CapEx program and growth focus? - The focus will be on new technology and tools with growth potential, while sustaining the existing rental fleet [53]

Financial Data and Key Metrics Changes - The company reported a 16% year-over-year revenue growth, reaching $42.9 million, and an 8% increase compared to the fourth quarter of 2024 [5][12] - Adjusted EBITDA grew nearly 18% year-over-year, remaining flat sequentially at $10.8 million [6][12] - Adjusted free cash flow for the first quarter was $5.7 million, with net debt reported at $52.1 million [12][13] Business Line Data and Key Metrics Changes - Tool rental revenue was approximately $34.5 million, while product sales revenue was $8.3 million [12] - The Western Hemisphere segment remains steady, while the Eastern Hemisphere, which includes deep casing tools and European drilling projects, showed some volatility [14][15] - The Eastern Hemisphere accounted for 11% of total revenue in Q1, with expectations for growth as the year progresses [16] Market Data and Key Metrics Changes - Despite a 6% global rig count decline, the company managed to increase revenue, indicating resilience in its business model [12][19] - The company anticipates a further decline in North American land rig counts, adjusting its revenue and EBITDA guidance accordingly [18][19] Company Strategy and Development Direction - The company is executing a two-phase strategy to mitigate potential disruptions, including negotiating with suppliers and implementing a cost reduction program expected to save $6 million annually [6][11] - A share buyback authorization of up to $10 million has been approved, reflecting confidence in the company's stock valuation [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased volatility and uncertainty in the marketplace due to tariffs, potential recession, and OPEC+ production decisions [6][19] - The company has adjusted its 2025 revenue guidance to a range of $145 million to $165 million, with adjusted EBITDA expected between $32 million and $42 million [19] Other Important Information - A noncash goodwill impairment of approximately $1.9 million was recorded, which does not affect day-to-day operations or liquidity [13] - The company is focused on maintaining operational agility and identifying future cost reduction opportunities to enhance shareholder value [11][20] Q&A Session Summary Question: Insights on maintaining free cash flow amidst challenges - Management emphasized cost reductions and aligning CapEx with projected activity to preserve EBITDA margins [24][26] Question: Growth expectations in the Eastern Hemisphere - Management noted flat conditions in the Middle East but highlighted emerging technologies gaining traction, which could offset declines [27][28] Question: North American market outlook - Management indicated a slow downturn in the U.S. market, with regional variances based on oil prices and economic conditions [45][46] Question: Capital allocation and guidance - Management acknowledged the wide range in interest expense guidance due to potential debt reduction and share buyback considerations [39][40]