Drilling Tools International (US:DTI)2024-11-14 21:00Financial 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[184]. - Net income for the three months ended September 30, 2024, was $0.9 million, down 79.8% from $4.3 million in the same period of 2023[184]. - Adjusted EBITDA for the three months ended September 30, 2024, was $11,125, down from $12,729 in 2023, representing a decline of approximately 12.6%[235]. - For the nine months ended September 30, 2024, net cash provided by operating activities was $9.7 million, compared to $17.5 million in 2023, reflecting a decrease of 44.5%[242]. - Total cash and cash equivalents as of September 30, 2024, were $12.0 million, with expectations that existing cash and cash flows will be sufficient for at least the next 12 months[236]. Revenue Breakdown - Tool rental revenue for the three months ended September 30, 2024, was $28.1 million, a decrease of 4.2% from $29.4 million in the same period of 2023[201]. - Product sales revenue for the three months ended September 30, 2024, increased by 36.5% to $12.0 million from $8.8 million in the same period of 2023[201]. - 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[222]. - Product sale revenue decreased by $2.0 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[223]. Cost and Expenses - Total costs and expenses for the three months ended September 30, 2024, were $35.8 million, an increase of 15.5% from $31.0 million in the same period of 2023[201]. - Selling, general, and administrative expenses for the three months ended September 30, 2024, were $19.9 million, up 19.0% from $16.6 million in the same period of 2023[201]. - Cost of tool rental revenue decreased by $3.3 million, or 44%, to $4.1 million for the three months ended September 30, 2024, compared to $7.3 million for the same period in 2023[216]. - Cost of product sale revenue increased by $3.9 million, or 216%, to $5.7 million for the three months ended September 30, 2024, compared to $1.8 million for the same period in 2023[217]. - Interest expense increased by $965 thousand, or 1322%, to $1.0 million for the three months ended September 30, 2024, compared to $0.1 million for the same period in 2023[220]. - Depreciation and amortization for the nine months ended September 30, 2024, was $17,232, compared to $15,035 in 2023, indicating an increase of approximately 14.6%[236]. Cash Flow Activities - Net cash used in investing activities for the nine months ended September 30, 2024, was $46.1 million, significantly higher than $20.0 million in 2023[244]. - Net cash provided by financing activities for the nine months ended September 30, 2024, was $43.4 million, a substantial increase from $4.3 million in 2023[246]. Market Conditions - The WTI oil price as of September 30, 2024, was approximately $68.75 per barrel, reflecting ongoing volatility in the oil market[189]. - Henry Hub natural gas spot prices decreased from an average of $2.64 per MMBtu in September 2023 to $2.28 per MMBtu in September 2024, a decline of 13.6%[192]. - The average monthly rig count in the Western Hemisphere decreased to 947 rigs in the three months ended September 30, 2024, compared to 1,007 rigs in the same period of 2023, a decline of 5.9%[194]. - The average monthly rig count in the Eastern Hemisphere increased to 736 rigs in the three months ended September 30, 2024, compared to 739 rigs in the same period of 2023, a slight decrease of 0.4%[194]. - Concerns regarding a possible recession may negatively impact oil demand, affecting the demand for the company's goods and services[261]. Cybersecurity Measures - The company has implemented a suite of cybersecurity controls, including regular testing and training sessions[262]. - An incident response plan has been established to address potential cybersecurity incidents and associated risks[262]. Foreign Currency and Inflation Risks - The majority of sales are denominated in United States and Canadian dollars, exposing the company to foreign currency risk as it expands internationally[258]. - The company has not entered into any hedging arrangements to mitigate foreign currency fluctuations[260]. - Inflationary pressures on the cost structure are expected to continue, although raw material and component costs are moderating[261]. Capital Expenditures - The company incurred capital expenditures of $19.6 million for property, plant, and equipment during the nine months ended September 30, 2024[244]. - The company has available federal net operating loss carryforwards that are expected to substantially reduce cash tax payments over the next several years[240].