Revenue Growth - Revenue increased by 334%, from $35 million in 2012 to $152 million in 2023[20] - The company generated revenue from tool rentals and product sales of $152.0 million for the year ended December 31, 2023, compared to $129.6 million for 2022, reflecting a year-over-year increase of approximately 17.5%[176] - Tool rental revenue increased by $20.2 million, or 20%, to $119.2 million for the year ended December 31, 2023, compared to $99.0 million in 2022, driven by increased market activity and customer pricing across all divisions[212] - Product sale revenue rose by $2.3 million, or 7%, to $32.8 million for the year ended December 31, 2023, compared to $30.5 million in 2022, primarily due to increased market activity related to accessory revenue[213] - Total revenue, net for the year ended December 31, 2023, was $152.0 million, an increase from $129.6 million in 2022[210] Operational Overview - The company operates from 16 locations in North America and has established 4 international stocking points in Europe and the Middle East[16] - The company operates from 16 locations in North America and maintains a large fleet of rental equipment, which includes various drilling tools and surface control equipment[175] - The company has over 325 master service agreements (MSAs) with leading OSCs and E&P operators as of December 31, 2023[34] - The company has established a fleet of 36 RotoSteer tools ready for deployment as of December 31, 2023, with plans for significant market share growth in the U.S. within the next three to five years[31] Revenue Sources - Directional Tool Rentals division accounted for approximately 61% of 2023 revenue, maintaining a fleet of over 25,000 tools[24] - Premium Tools Division contributed approximately 19% of 2023 revenue, with a fleet of about 1,000,000 feet of drill pipe and tubing[24] - Wellbore Optimization Tools division, which includes the patented Drill-N-Ream tool, accounted for approximately 17% of 2023 revenue[24] - Other Products & Services division accounted for approximately 3% of 2023 revenue, providing inspection and machining services[24] - Approximately 50% of 2023 revenue comes from diversified OSCs, while E&P operators account for about 47%[33] Safety and Compliance - The company has transformed its operations to meet higher safety and quality standards in the oil and gas industry[28] - The total recordable incident rate has decreased from 2.3 in 2018 to 1.23 in 2023, which is lower than the industry average[36] - The company has a commitment to safety, as evidenced by the implementation of the "Safety Now" program, which is crucial for maintaining business relationships with major clients[36] - Compliance with environmental laws and regulations may increase operational costs and limit demand for products and services[102] Financial Performance - The net income for the year ended December 31, 2023, was $14.7 million, down from $21.1 million in 2022, indicating a decrease of approximately 30.3%[176] - As of December 31, 2023, the company had an accumulated deficit of $6.3 million, an improvement from an accumulated deficit of $21.1 million as of December 31, 2022[176] - Operating income for the year ended December 31, 2023, was $27.9 million, compared to $25.3 million in 2022[210] - Selling, general, and administrative expenses rose to $68.26 million in 2023 from $51.57 million in 2022, driven by increased compliance and governance costs[210] Market Conditions - The average U.S. onshore rig count increased by 59% to 667 rigs, while the Canadian rig count doubled to 176 rigs since 2020[26] - The average U.S. onshore rig count was 667 for the year ended December 31, 2023, down from 705 in 2022, but significantly improved from 418 in 2020[187] - The demand for the company's services and products is primarily influenced by the general level of activity in the oil and gas industry, including the number of active drilling rigs and capital spending by oil and natural gas companies[178] Strategic Initiatives - The company aims to increase revenue from E&P operators from over 47% in 2023 to more than 50%[28] - The company plans to execute accretive mergers and acquisitions, focusing on the downhole rental tool sector[29] - The company aims to increase the percentage of revenue derived from outside North America over the next five years through strategic acquisitions[31] - The company is actively evaluating acquisitions to enhance competitiveness, but integration challenges may arise, impacting operational focus and profitability[71][72] Risks and Challenges - The company faces risks from industry consolidation, which could lead to reduced capital spending by customers and a potential loss of business[52] - Rising costs due to inflation, particularly in freight and materials, have not yet materially impacted financial results, but future cost recovery from customers remains uncertain[64][66] - Delays in obtaining necessary permits for drilling activities could adversely affect customer operations and, consequently, the company's revenue[67][69] - The competitive landscape in the oil and gas drilling tool rental industry is intense, with potential price competition affecting profitability[70] - The company may incur additional indebtedness to execute its long-term growth strategy, which could reduce profitability[87] Shareholder Considerations - The company has no current plans to pay cash dividends on the Common Stock for the foreseeable future, as future earnings will be retained for operations and expansion[170] - The Common Stock is listed on Nasdaq under the symbol "DTI," with a closing price of $3.20 per share as of December 29, 2023[169] - The company is a "controlled company," with HHEP controlling more than 50% of the voting power for the election of the Board, which may limit stockholder protections[148] - The issuance of additional shares or equity securities could dilute existing shareholders' ownership interests and depress the market price of shares[140] Cybersecurity and IT - The company has a cybersecurity Risk Management Policy in place to identify and mitigate risks, with no current material cybersecurity risks reported[153][154] - The company’s IT systems, particularly COMPASS, are critical for operations, and failures or cyberattacks could disrupt business[94] Tax and Regulatory Environment - The company may face significant income tax obligations that could impact after-tax profitability and financial results[114] - Changes in tax laws or rates could adversely affect operating results and overall financial condition[109] - The Inflation Reduction Act of 2022 includes a charge on methane emissions, which could impose additional compliance obligations[104] Capital Expenditures - The company spent $44 million and $25 million on property, plant, and equipment for the years ended December 31, 2023, and 2022, respectively[89] - The company spent $44 million in 2023 and $25 million in 2022 to maintain and refresh its rental fleet, indicating significant capital requirements[89] - Significant expenditures are expected to continue as the company expands its business, influenced by the performance of the oil and gas industry[122]

Financial Performance - For the three months ended September 30, 2023, the company generated revenue of $38.1 million from tool rentals and product sales, compared to $36.5 million for the same period in 2022, reflecting a growth of 4.4%[154] - The net income for the three months ended September 30, 2023, was $4.3 million, down from $7.0 million in the same period of 2022, indicating a decrease of 38.6%[154] - For the nine months ended September 30, 2023, total revenue was $116.8 million, up from $92.9 million in 2022, representing a year-over-year increase of 25.7%[154] - Total revenue, net for the three months ended September 30, 2023, was $38.1 million, an increase from $36.5 million in the same period of 2022[185] - Tool rental revenue increased by $2.5 million, or 9%, to $29.4 million for the three months ended September 30, 2023, compared to $26.8 million for the same period in 2022[187] - Product sale revenue decreased by $0.9 million, or 10%, to $8.8 million for the three months ended September 30, 2023, compared to $9.7 million for the same period in 2022[188] - Tool rental revenue increased by $20.4 million, or 29%, to $90.6 million for the nine months ended September 30, 2023, compared to $70.3 million for the same period in 2022[201] - Product sale revenue increased by $3.6 million, or 16%, to $26.2 million for the nine months ended September 30, 2023, compared to $22.6 million for the same period in 2022[202] Costs and Expenses - Total costs and expenses for the three months ended September 30, 2023, were $31.0 million, compared to $28.5 million for the same period in 2022[185] - Selling, general, and administrative expenses increased by $1.9 million, or 13%, to $16.6 million for the three months ended September 30, 2023, compared to $14.7 million for the same period in 2022[193] - Depreciation and amortization expenses increased by $0.5 million, or 10%, to $5.3 million for the three months ended September 30, 2023, compared to $4.8 million for the same period in 2022[194] - Interest expense increased by $28 thousand, or 62%, to $0.1 million for the three months ended September 30, 2023, compared to $45 thousand for the same period in 2022[195] - Personnel-related expenses increased by $5.0 million, with stock-based compensation rising by $1.7 million due to the Merger[208] - Interest expense surged to $1.0 million, a 2327% increase compared to $41 thousand in the prior year, primarily due to the settlement of the interest rate swap[210] - Other expense increased by $6.0 million, or 2852%, to $6.2 million, primarily due to transaction fees related to the Business Combination[213] Cash Flow and Financial Position - Free Cash Flow for the nine months ended September 30, 2023 was $(19.3) million, compared to $(10.6) million in the prior year[218] - Adjusted EBITDA increased to $40.8 million for the nine months ended September 30, 2023, up from $28.1 million in the prior year[220] - Net cash provided by operating activities was $17.5 million for the nine months ended September 30, 2023, compared to $5.6 million in the prior year[227] - Net cash used in investing activities was $20.0 million, with purchases of property, plant, and equipment totaling $36.7 million[228] - As of September 30, 2023, the company had $4.0 million in cash and cash equivalents, sufficient for at least the next 12 months[221] - Net cash provided by financing activities for the nine months ended September 30, 2023 was $4.3 million, resulting from proceeds of $23.1 million from the Merger and PIPE Financing, net of transaction costs[230] Market and Operational Insights - The average U.S. onshore rig count for the three months ended September 30, 2023, was 627 rigs, compared to 741 rigs for the same period in 2022, showing a decline of 15.4%[164] - WTI oil prices were approximately $89 per barrel as of September 30, 2023, reflecting a recovery from a low of $67 per barrel in March 2023[160] - The company expects its tool rental services revenue to increase over time due to anticipated growth in drilling activity and customer pricing[173] - The company plans to increase investments in its sales and marketing organization to drive additional revenue and expand its global customer base[182] Risks and Challenges - The company is experiencing rising costs due to global inflation, which is expected to impact profitability in the near term[165] - The company anticipates that gross margins will improve slightly as it leverages its existing cost structure to support increased business activity[178] - The company expects to continue experiencing inflationary pressures on its cost structure for the foreseeable future, although raw material and component costs are moderating[242] - The company has not entered into any hedging arrangements to minimize the impact of foreign currency exchange rate fluctuations[240] - The company does not believe that foreign currency risk had a material effect on its business during the periods presented[241] Customer Concentration - During the three and nine months ended September 30, 2023, 28% of total revenue was earned from two customers, compared to 26% and 27% for the same periods in 2022[239] - Amounts due from these two customers included in accounts receivable at September 30, 2023 were approximately $8.4 million[239] Accounting and Compliance - There have been no material changes to the company's critical accounting policies and estimates compared to previous reports[234] - The company has irrevocably elected to take advantage of the extended transition period under the JOBS Act, delaying the adoption of certain accounting standards[236] Cybersecurity - Cybersecurity risk mitigation efforts include regular testing of systems and an established incident response plan, though there is no assurance that these efforts will fully mitigate risks[243]

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, 2023 ☐ 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 87-2488708 ( ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2023 ☐ 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 ROC ENERGY ACQUISITION CORP. (Exact Name of Registrant as Specified in Its Charter) Delaware 87-2488708 (State or o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 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 ROC ENERGY ACQUISITION CORP. (Exact name of registrant as specified in its charter) | Delaware | 87-2488708 ...