UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number: 001-41103 DRILLING TOOLS INTERNATIONAL CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 87-248870 ...

Exhibit 99.1 NEWS RELEASE Drilling Tools International Corp. Reports 2025 Second Quarter Results Company maintains full year 2025 outlook HOUSTON — August 13, 2025 — Drilling Tools International Corp., (NASDAQ: DTI) ("DTI" or the "Company"), a global oilfield services company that designs, engineers, manufactures and provides a differentiated, rental-focused offering of tools for use in onshore and offshore horizontal and directional drilling operations, as well as other cutting-edge solutions across the we ...

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% during the three months ending March 31, 2025[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] Operating Income and Expenses - Total operating income decreased by 36% to $3.3 million, down from $5.13 million in the prior year[190] - Interest expense increased significantly by 619% to $1.3 million, attributed to new loans and credit facility draws[194] - Corporate and other expenses rose by 15% to $10.1 million, mainly due to increased depreciation from acquired assets[193] Cash Flow and Liquidity - 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] - Cash and cash equivalents as of March 31, 2025, were $2.8 million, with sufficient liquidity expected for the next 12 months[200] - Cash and cash equivalents at March 31, 2025, included approximately $5.3 million due from major customers[216] Future Outlook and Risks - The company expects federal net operating loss carryforwards to substantially reduce cash tax payments over the next several years[204] - The company has not entered into any hedging arrangements to minimize foreign currency exchange rate fluctuations, which may impact future cash flows[217] - The company is monitoring inflation risks due to rising international tariffs that could adversely affect business operations[219] - The company will continue to evaluate capital requirements for liquidity needs, influenced by various risks including inflation and interest rates[206] Cybersecurity - Cybersecurity measures include regular testing and an incident response plan to mitigate risks, although no assurance can be given that incidents will not occur[222] Rig Count - The average 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] Customer Concentration - 29.0% of total revenue in Q1 2025 was earned from two customers, slightly down from 30.0% in Q1 2024[216]

Financial Performance - Total consolidated revenue for the first quarter of 2025 was $42.9 million, with Tool Rental revenue at approximately $34.5 million and Product Sales revenue totaling $8.3 million, representing a 16% increase year-over-year[2][3]. - Adjusted EBITDA for the first quarter was $10.8 million, showing an 18% growth compared to the same period last year[2][3]. - The company reported a net loss of approximately $1.7 million for the first quarter, with diluted EPS at a loss of $0.05 per share[2][3][15]. - Tool rental revenue increased from $29.97 million in Q1 2024 to $34.53 million in Q1 2025, while product sales rose from $7.01 million to $8.35 million in the same period[15]. - Adjusted EBITDA for Q1 2025 was $10,754 million, slightly down from $10,891 million in Q1 2024, indicating a decrease of about 1.3%[29]. - Adjusted Free Cash Flow for Q1 2025 was $5,711 million, an increase from $4,663 million in Q1 2024, reflecting a growth of approximately 22.4%[31]. - Net income for the three months ended March 31, 2025, was a loss of $1,669 million, compared to a profit of $3,126 million for the same period in 2024[19]. Guidance and Projections - Updated full-year 2025 revenue guidance is set between $145 million and $165 million, with Adjusted EBITDA guidance between $32 million and $42 million[6]. - The Adjusted EBITDA margin is projected to be between 22% and 25% for the full year 2025[6]. - For the three months ended March 31, 2025, Drilling Tools International Corp. reported a net income ranging from $(4,500) thousand to $(1,500) thousand[34]. - Adjusted EBITDA is estimated to be between $32,000 thousand and $42,000 thousand, with an adjusted EBITDA margin of 22% to 25%[34]. - Revenue for the same period is projected to be between $145,000 thousand and $165,000 thousand[34]. - Adjusted Free Cash Flow is expected to range from $14,000 thousand to $19,000 thousand, with an adjusted free cash flow margin of 10% to 12%[36]. Expenses and Liabilities - The company has implemented a new program to cut expenses by approximately $6 million in response to market volatility and uncertainty[4][5]. - Total current liabilities rose to $34,801 million as of March 31, 2025, compared to $30,963 million at December 31, 2024, marking an increase of approximately 12.0%[17]. - The company incurred transaction expenses of $732 million in Q1 2025, down from $889 million in Q1 2024, reflecting a decrease of about 17.7%[31]. - Goodwill impairment recorded in Q1 2025 was $1,901 million, with no such impairment reported in Q1 2024[29]. - Goodwill impairment is projected to be between $1,800 thousand and $2,000 thousand[34]. - Depreciation and amortization expenses are estimated between $26,500 thousand and $28,000 thousand[34]. - Interest expense, net, is projected to be between $3,700 thousand and $5,000 thousand[34]. - The company anticipates other expenses to range from $1,500 thousand to $3,000 thousand[34]. - Stock option expenses are estimated to be between $2,500 thousand and $3,000 thousand[34]. Cash and Assets - As of March 31, 2025, the company had approximately $2.8 million in cash and cash equivalents and net debt of $52.1 million[2][15]. - Cash at the end of Q1 2025 was $2,789 million, a significant decrease from $14,049 million at the end of Q1 2024, representing a decline of about 80.2%[19]. - Total assets increased to $233,169 million as of March 31, 2025, up from $222,431 million at December 31, 2024, representing a growth of approximately 3.3%[17]. - Basic weighted-average common shares outstanding increased to 35,592,737 in Q1 2025 from 29,768,568 in Q1 2024, indicating a rise of approximately 19.6%[33]. Shareholder Actions - The board authorized a $10 million share repurchase program to enhance shareholder value, reflecting confidence in the company's long-term strategy[8][9].

Revenue Growth and Composition - Revenue increased by 340%, from $35 million in 2012 to $154 million in 2024[18]. - Directional Tool Rentals (DTR) accounted for approximately 50% of total revenue in 2024, with a fleet of over 23,000 tools[17][20]. - Premium Tools Division (PTD) contributed approximately 17% of total revenue in 2024, with a fleet of approximately 1,000,000 feet of drill pipe[20]. - Wellbore Optimization Tools (WOT) represented approximately 21% of total revenue in 2024, featuring tools that enhance drilling efficiency[20]. - New acquisitions accounted for approximately 10% of total revenue in 2024, including Casing Technologies Group Limited and Superior Drilling Products[21]. - Approximately 46% of the company's 2024 revenue comes from diversified oilfield service companies, while E&P operators account for about 48%[31]. - The company generated revenue from tool rentals and product sales of $154.4 million for the year ended December 31, 2024, compared to $152.0 million for 2023, indicating a slight increase in revenue[194]. Operational Expansion - The company expanded its customer base from less than 10% to over 45% revenue derived from exploration and production (E&P) operators from 2014 to 2024[27]. - The company established 16 service and support centers in North America and 11 additional international centers across Europe, the Middle East, and Asia-Pacific[18]. - In 2024, the company expanded its international operations by completing 2 acquisitions, increasing its service and support centers from 4 to 11[28]. - The company operates a large rental tool fleet concentrated in the Permian Basin, which is critical for securing large contracts across multiple geographic locations[29]. - The company operates from 16 locations in North America and maintains 11 international stocking points in Europe, the Middle East, and Asia-Pacific[35]. Financial Performance and Profitability - The net income for the company was $3.0 million for the year ended December 31, 2024, down from $14.7 million in 2023, reflecting a significant decrease in profitability[194]. - The accumulated deficit as of December 31, 2024, was $3.6 million, improved from $6.3 million in 2023, showing a reduction in historical losses[194]. - The company is experiencing rising costs due to global inflation, which is expected to impact profitability in the near term[205]. Safety and Compliance - The company has reduced its total recordable incident rate from 2.3 in 2018 to 1.15 in 2024, which is lower than the industry average, demonstrating a commitment to employee safety[34]. - Compliance with environmental laws and regulations may increase operational costs and affect demand for products and services[121]. - The company is subject to regulatory changes, including potential restrictions on federal oil and gas leasing practices, which could adversely affect operations and revenue[82]. Strategic Initiatives - The company aims to maximize the profitability of its core rental tool business and expand geographically[26]. - The company has a strategy to execute accretive mergers and acquisitions, having completed four transactions in 2024[26]. - The company completed a merger with ROC Energy Acquisition Corp. on June 20, 2023, which may impact future operational strategies and market positioning[190]. Risks and Challenges - The company faces risks related to dependence on a small number of customers and potential challenges in obtaining necessary permits for operations[43]. - The company experienced a significant reliance on a small number of customers, with 28% and 39% of total revenue coming from its two largest customers in 2024 and 2023, respectively[64]. - The company is dependent on the oil and gas industry's activity levels, which are influenced by crude oil and natural gas prices, and any downturn could adversely affect demand for its products and services[59]. - The company may face significant competition in the oil and gas drilling tool rental industry, which could lead to price competition and reduced utilization rates[85]. - The company may incur additional indebtedness to support its long-term growth strategy, which could reduce profitability[102]. Cybersecurity and IT Management - The company has a cybersecurity Risk Management Policy in place to identify and manage cybersecurity risks[169]. - Cybersecurity incidents could damage the company's reputation, disrupt operations, and impact revenues[180]. - The company utilizes third-party services for cybersecurity support and conducts annual risk assessments[173][175]. - The Chief Financial Officer and VP of Finance are responsible for overseeing cybersecurity threats and risks, reporting to the Board of Directors[179]. Market Conditions and Economic Factors - The monthly average rig count in the Western Hemisphere decreased by 10% from 1,040 rigs in 2023 to 940 rigs in 2024[25]. - The WTI oil price was approximately $72.44 per barrel as of December 31, 2024, reflecting ongoing volatility in the oil market[200]. - Henry Hub natural gas spot prices increased from an average of $2.52 per MMBtu in December 2023 to $3.01 per MMBtu in December 2024, indicating a rebound in natural gas prices[202]. Shareholder and Financial Governance - The company has broad discretion over its cash usage, with no current plans to pay cash dividends on common stock, potentially limiting returns for shareholders[55]. - There are no current plans to pay cash dividends on the Common Stock for the foreseeable future, which may limit returns for investors[161]. - The company's sole material asset is its direct equity interest in DTIH, making it dependent on distributions from DTIH for financial obligations[162]. - The Nasdaq Capital Market may delist the Common Stock, which could adversely affect trading and liquidity[163].

Financial Performance - For the full year 2024, Drilling Tools International Corp. generated total consolidated revenue of $154.4 million, with tool rental revenue at approximately $117.9 million and product sales revenue totaling $36.5 million[3]. - In Q4 2024, total consolidated revenue was $39.8 million, with tool rental revenue around $31.5 million and product sales revenue of $8.3 million[4]. - Adjusted EBITDA for 2024 was $40.1 million, while adjusted free cash flow was $17.2 million[3]. - The company reported a net income of $3.0 million for 2024, with diluted EPS of $0.09[3]. - Net income for 2024 was $3,014 million, a decrease from $14,748 million in 2023, indicating a decline of 79.6%[17]. - Adjusted EBITDA for the year ended December 31, 2024, was $40,101,000, down 21.5% from $51,042,000 in 2023[30]. - Adjusted Free Cash Flow for the year ended December 31, 2024, increased to $17,209,000 from $7,292,000 in 2023, representing a 135.5% increase[30]. - For the three months ended December 31, 2024, net loss was $1,345,000 compared to a net income of $3,823,000 in the same period of 2023[30]. - Adjusted Net Income for the three months ended December 31, 2024, was $600,000, a decrease of 84.4% from $3,840,000 in 2023[32]. - Adjusted Basic earnings per share for the year ended December 31, 2024, was $0.32, down from $0.88 in 2023[32]. Future Projections - For 2025, the company expects consolidated revenue to range between $163 million and $183 million, with adjusted EBITDA projected between $40 million and $50 million[6]. - The adjusted EBITDA margin for 2025 is anticipated to be between 25% and 27%[6]. - Estimated revenue for the twelve months ending December 31, 2025, is projected to be between $163,000,000 and $183,000,000[34]. - Adjusted EBITDA margin for the twelve months ending December 31, 2025, is expected to be between 25% and 27%[34]. Cash and Debt Management - As of December 31, 2024, the company had approximately $6.2 million in cash and cash equivalents, with net debt of $47.6 million[3]. - Cash and cash equivalents at the end of the period rose to $6,185 million, up from $6,003 million in 2023, a 3.0% increase[17]. - Net cash flows from operating activities decreased to $6,058 million in 2024 from $23,334 million in 2023, a drop of 74.0%[17]. Asset and Liability Changes - Total assets increased to $222,431 million in 2024 from $132,498 million in 2023, representing a 67.8% growth[15]. - Accounts receivable increased significantly to $39,606 million in 2024, compared to $29,929 million in 2023, marking a 32.5% rise[15]. - Inventories surged to $17,502 million in 2024, up from $5,034 million in 2023, reflecting a 248.5% increase[15]. - The company reported a total liabilities increase to $102,472 million in 2024, up from $43,808 million in 2023, a 133.3% increase[15]. Acquisitions and Growth Strategy - Drilling Tools International Corp. plans to significantly grow its international revenue in 2025, despite a flat market environment forecasted for the year[5]. - The company is actively pursuing additional acquisitions to enhance value and expand its geographic reach, having already acquired several companies in the past year[5]. - The company engaged in acquisitions, with cash outflow of $47,258 million for business acquisitions in 2024[17]. Performance Metrics - Adjusted EBITDA is used to evaluate operating performance, excluding non-recurring items and providing a clearer view of ongoing business performance[19]. - Adjusted Free Cash Flow for the company is defined as Adjusted EBITDA less Gross Capital Expenditures, aiding in performance evaluation[21]. - Transaction expenses for the year ended December 31, 2024, were $7,036,000, an increase from $5,979,000 in 2023[30]. - Gross capital expenditures for the year ended December 31, 2024, were $(22,892,000), compared to $(43,750,000) in 2023[30].

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

Financial Performance - Total consolidated revenue for Q3 2024 was $40.1 million, with Tool Rental revenue at approximately $28.1 million and Product Sales revenue totaling $12.0 million[3]. - Net Income for Q3 2024 was $867,000, while Adjusted Net Income was $4.6 million, resulting in a Diluted EPS of $0.03 and Adjusted Diluted EPS of $0.14[3]. - Adjusted EBITDA for Q3 2024 was $11.1 million, and Adjusted Free Cash Flow was $7.8 million[3]. - The company revised its 2024 full-year revenue outlook to between $145 million and $155 million, with Adjusted Net Income expected to be between $7.7 million and $9.8 million[5]. - DTI's total operating expenses for Q3 2024 were $35.8 million, leading to an Income from Operations of $4.3 million[3]. - Net income for the nine months ended September 30, 2024, was $4,359,000, a decrease of 60% compared to $10,925,000 in the same period of 2023[16]. - Adjusted EBITDA for the nine months ended September 30, 2024, was $30,982,000, down 24% from $40,840,000 in the same period of 2023[26]. - Adjusted net income for the nine months ended September 30, 2024, was $8,710,000, down from $14,965,000 in 2023, reflecting a decrease of about 41.0%[30]. - For the three months ended September 30, 2024, the net income decreased to $867,000 from $4,287,000 in the same period of 2023, representing a decline of approximately 80.7%[30]. - The company reported an adjusted income before tax of $9,540,000 for the nine months ended September 30, 2024, down from $22,089,000 in 2023, a decrease of approximately 56.7%[30]. Cash Flow and Investments - As of September 30, 2024, DTI had approximately $12 million in cash and cash equivalents and net debt of $32.1 million[3]. - Net cash flows from operating activities for the nine months ended September 30, 2024, were $9,723,000, compared to $17,484,000 in 2023, reflecting a decline of 44%[16]. - Cash at the end of the period increased to $11,961,000 in 2024 from $3,989,000 in 2023, representing a growth of 199%[16]. - The company reported a net cash from investing activities of $(46,132,000) for the nine months ended September 30, 2024, compared to $(20,027,000) in 2023, indicating increased investment activity[16]. - Adjusted Free Cash Flow for the nine months ended September 30, 2024, was $11,303,000, compared to $4,064,000 in 2023, showing a significant increase of 178%[28]. - The company incurred gross capital expenditures of $19,678,000 for the nine months ended September 30, 2024, down from $36,776,000 in 2023, a reduction of 47%[28]. - The company completed the acquisition of a business for $38,670,000, impacting cash flows from investing activities significantly[16]. Operational Strategy and Market Position - The company is focused on an acquisition growth strategy to enhance its market position amid industry headwinds[4]. - DTI operates 16 service and support centers in North America and 11 international centers across EMEA and APAC regions[7]. - The company is enhancing its cost management program to align with current market conditions and anticipates a sequential slowdown in Q4 due to holiday breaks and budget constraints from customers[4]. Shareholder Information - The basic weighted-average common shares outstanding increased to 30,893,602 for the nine months ended September 30, 2024, from 18,608,708 in 2023, an increase of about 65.5%[30]. - The diluted weighted-average common shares outstanding increased to 31,404,333 for the nine months ended September 30, 2024, compared to 23,554,593 in 2023, an increase of about 33.2%[30]. Future Projections - Estimated adjusted EBITDA for the twelve months ended December 31, 2024, is projected to be between $38,000,000 and $43,000,000, with an adjusted EBITDA margin of 26% to 28%[31]. - Estimated adjusted free cash flow for the twelve months ended December 31, 2024, is expected to range from $18,000,000 to $21,000,000, with a free cash flow margin of 12% to 14%[32]. - The estimated adjusted net income for the twelve months ended December 31, 2024, is projected to be between $7,700,000 and $9,800,000[33]. Credit Quality and Asset Management - The company reported a provision for credit losses of $42,000 in 2024, a decrease from $502,000 in 2023, indicating improved credit quality[16]. - The company reported a loss on asset disposal of $27,000 in 2024, with no comparable loss in 2023, indicating potential asset management challenges[16]. - Transaction expenses for the nine months ended September 30, 2024, totaled $4,766,000, compared to $5,963,000 in the same period of 2023, indicating a decrease of approximately 20.0%[30].

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

Financial Performance - Total revenue for the three months ended March 31, 2024, was $36.974 million, a decrease of 9% from $40.799 million in the same period of 2023[197]. - Net income for the three months ended March 31, 2024, was $3.126 million, down from $5.701 million in the same period of 2023[197]. - Adjusted EBITDA decreased to $10.9 million for Q1 2024 from $14.8 million in Q1 2023, reflecting underlying trends in business performance[212]. - Net cash provided by operating activities was $3.3 million for Q1 2024, down from $7.1 million in Q1 2023, influenced by changes in operating assets and liabilities[222]. Revenue Breakdown - Tool rental revenue decreased by $2.310 million, or 7%, to $29.966 million for the three months ended March 31, 2024, compared to $32.276 million in 2023[199]. - Product sale revenue decreased by $1.515 million, or 18%, to $7.008 million for the three months ended March 31, 2024, compared to $8.523 million in 2023[200]. - As of March 31, 2024, 30.0% of total revenue was generated from two customers, with accounts receivable from these customers amounting to approximately $6.6 million[238]. Cost and Expenses - The company expects total costs and expenses to increase in absolute dollars in future periods due to anticipated growth in revenue and employee headcount[188]. - Tool rental revenue cost decreased by $1.1 million, or 14%, to $7.0 million for Q1 2024 compared to $8.1 million in Q1 2023, primarily due to reduced rental activity[202]. - Product sale revenue cost increased by $0.2 million, or 18%, to $1.5 million for Q1 2024 compared to $1.3 million in Q1 2023, driven by additional costs from the acquisition of Deep Casing Tools[203]. - Selling, general, and administrative expenses decreased by $0.5 million, or 3%, to $17.9 million for Q1 2024 compared to $18.4 million in Q1 2023, mainly due to lower bonus expenses[204]. - Depreciation and amortization expenses increased by $0.4 million, or 7%, to $5.4 million for Q1 2024 compared to $5.0 million in Q1 2023, attributed to additions to property, plant, and equipment[205]. - Interest expense decreased by $0.4 million, or 68%, to $0.2 million for Q1 2024 compared to $0.6 million in Q1 2023, due to a reduction in interest expense on the revolving line of credit[206]. - Other expense increased by $1.2 million, or 2913%, to $1.1 million for Q1 2024 compared to Q1 2023, primarily due to transaction costs related to a business combination[209]. Market Conditions - The average U.S. onshore rig count was 602 for the three months ended March 31, 2024, compared to 742 for the same period in 2023[175]. - WTI oil price was approximately $84 per barrel as of March 31, 2024, reflecting ongoing volatility in the oil market[169]. - Henry Hub natural gas spot prices decreased from an average of $2.31 per MMBtu in March 2023 to $1.49 per MMBtu in March 2024[173]. - Inflationary pressures on the cost structure are expected to continue, although raw material and component costs are moderating due to a strengthening U.S. dollar[242]. Strategic Plans - The company plans to increase investments in its sales and marketing organization to drive additional revenue and expand its global customer base[193]. - The company has not entered into any hedging arrangements to mitigate foreign currency exchange rate fluctuations, which may impact future results as international market presence expands[240]. Accounting and Compliance - The company utilizes the acquisition method of accounting for business combinations, allocating total purchase consideration to acquired assets and assumed liabilities based on estimated fair values[229]. - The accounting for business combinations must be completed within one year from the acquisition date, with adjustments potentially impacting financial statements[233]. - Costs directly attributable to business combinations are expensed as incurred, affecting the condensed consolidated statements of income[234]. - The company has elected to take advantage of the extended transition period under the JOBS Act, delaying the adoption of certain accounting standards[236]. - The estimated fair values assigned to acquired assets and liabilities are based on reasonable assumptions, but are subject to uncertainty and potential material changes[232]. Risk Management - The company monitors credit quality of customers and maintains an allowance for doubtful accounts to address potential losses from customer payments[237]. - The company has established an incident response plan and team to address cybersecurity risks, although there is no assurance that these efforts will fully mitigate such risks[243].