Drilling Tools International (DTI) - 2025 Q1 - Quarterly Results

Executive Summary First Quarter 2025 Financial Highlights Drilling Tools International Corp. (DTI) reported total consolidated revenue of $42.9 million for the first quarter of 2025, marking a 16% increase year-over-year. Despite this growth, the company recorded a net loss of $1.7 million, or ($0.05) per diluted share. On an adjusted basis, net income was $0.7 million, or $0.02 per diluted share, with Adjusted EBITDA holding steady at $10.8 million Q1 2025 Financial Performance | Metric | Value (in millions, except per share data) | | :--- | :--- | | Total Consolidated Revenue | $42.9 | | Tool Rental Revenue | $34.5 | | Product Sales Revenue | $8.3 | | Operating Income | $3.3 | | Net Loss | $(1.7) | | Adjusted Net Income | $0.7 | | Diluted EPS | $(0.05) | | Adjusted Diluted EPS | $0.02 | | Adjusted EBITDA | $10.8 | | Adjusted Free Cash Flow | $5.7 | - Revenue demonstrated strong growth, increasing 7.6% sequentially and 16% compared to the first quarter of the previous year. Adjusted EBITDA was nearly flat sequentially but grew almost 18% year-over-year[3] Management Commentary and Outlook Management acknowledged increased market volatility due to potential tariffs, recession fears, and OPEC+ decisions. In response, the company has initiated a $6 million expense reduction program for the year. Citing this uncertainty, DTI has adjusted its full-year 2025 guidance, now forecasting revenue between $145 million and $165 million and Adjusted EBITDA between $32 million and $42 million - The company is facing market uncertainty from potential tariffs, recession fears, and OPEC+ production decisions[4] - To mitigate risks, DTI has implemented a $6 million cost-cutting program and believes its strong US manufacturing base and diverse supply chain provide insulation from tariff impacts[4][5] Updated 2025 Full Year Outlook | 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 | Share Repurchase Program The Board of Directors has authorized a share repurchase program of up to $10 million of the company's outstanding common stock. Management stated this decision reflects confidence in DTI's long-term strategy and financial health, viewing the company's stock as an undervalued investment opportunity. The program is intended to enhance shareholder value by optimizing the capital structure - The Board of Directors authorized a program to repurchase up to $10 million of the company's common stock[8] - The repurchase program is part of a disciplined capital allocation strategy and is intended to enhance shareholder value, reflecting the belief that the stock is currently undervalued[8] - Repurchases may occur through open-market transactions, privately negotiated purchases, or other methods in accordance with securities laws[9] Financial Statements Consolidated Statement of Operations For the first quarter of 2025, total revenue grew 16.0% year-over-year to $42.9 million. However, operating income fell to $3.3 million from $5.1 million in the prior year, largely due to increased operating expenses and a $1.9 million goodwill impairment charge. This resulted in a net loss of $1.7 million, a significant downturn from the $3.1 million net income reported in Q1 2024 Q1 Statement of Operations Highlights (in thousands) | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenue, net | $42,880 | $36,974 | +16.0% | | Operating Income | $3,303 | $5,130 | -35.6% | | Net Income (Loss) | $(1,669) | $3,126 | N/A | | Diluted EPS | $(0.05) | $0.11 | N/A | - The company recorded a goodwill impairment charge of $1.9 million in Q1 2025, which was not present in the prior-year period and significantly impacted profitability[15] - Selling, general, and administrative (SG&A) expenses increased by 20.4% YoY to $21.6 million[15] Consolidated Balance Sheets As of March 31, 2025, DTI's total assets were $233.2 million, an increase from $222.4 million at the end of 2024. Total liabilities rose to $110.5 million from $102.5 million over the same period, driven by increases in accounts payable and the revolving line of credit. Cash and cash equivalents decreased from $6.2 million to $2.8 million during the quarter Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $2,789 | $6,185 | | Total Current Assets | $67,374 | $68,076 | | Total Assets | $233,169 | $222,431 | | Total Current Liabilities | $34,801 | $30,963 | | Total Liabilities | $110,473 | $102,472 | | Total Shareholders' Equity | $122,696 | $119,959 | - The revolving line of credit increased to $30.0 million from $27.1 million at the end of the previous year[17] Consolidated Statement of Cash Flows In Q1 2025, the company generated $2.4 million in cash from operating activities, a decrease from $3.3 million in Q1 2024. Cash used in investing activities was $7.3 million, mainly for a business acquisition ($5.6 million) and equipment purchases ($5.0 million). Cash from financing activities was a net inflow of $1.4 million. Overall, cash decreased by $3.4 million during the quarter Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $2,431 | $3,311 | | Net cash from investing activities | $(7,280) | $(19,585) | | Net cash from financing activities | $1,392 | $24,611 | | Net Change in Cash | $(3,396) | $8,046 | - Investing activities were significant, with $5.6 million used for a business acquisition and $5.0 million for the purchase of property, plant, and equipment[19] Non-GAAP Financial Measures and Reconciliations Definition of Non-GAAP Measures The company utilizes non-GAAP financial measures such as Adjusted EBITDA, Adjusted Free Cash Flow, Net Debt, and Adjusted Net Income to supplement its GAAP results. These metrics are intended to provide a clearer view of ongoing operational performance by excluding items that management believes are not reflective of the core business, such as impairment charges, transaction costs, and stock-based compensation - Adjusted EBITDA is defined as net earnings adjusted for interest, taxes, depreciation, amortization, goodwill impairment, stock-based compensation, and other non-recurring items[21] - Adjusted Free Cash Flow is calculated as Adjusted EBITDA less Gross Capital Expenditures[23] - Adjusted Net Income and Adjusted Diluted EPS exclude non-recurring items like goodwill impairment and transaction costs to better evaluate operating performance[25][26] Reconciliation of GAAP to Non-GAAP Measures For Q1 2025, DTI reconciled its GAAP net loss of $1.7 million to a non-GAAP Adjusted EBITDA of $10.8 million. Key adjustments included adding back $6.7 million for depreciation and amortization and a $1.9 million goodwill impairment. The GAAP net loss was also reconciled to an Adjusted Net Income of $0.7 million, or $0.02 per adjusted diluted share. Adjusted Free Cash Flow for the quarter was $5.7 million Reconciliation of Net Loss to Adjusted EBITDA (Q1 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net loss | $(1,669) | | Depreciation and amortization | $6,722 | | Interest expense, net | $1,309 | | Goodwill impairment | $1,901 | | Other adjustments | $2,491 | | Adjusted EBITDA | $10,754 | Reconciliation of Net Loss to Adjusted Net Income (Q1 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net loss | $(1,669) | | Transaction expense | $732 | | Goodwill impairment | $1,901 | | Income tax expense (benefit) | $(159) | | Adjusted Income Before Tax | $805 | | Adjusted Income tax expense | $(70) | | Adjusted Net Income | $735 | - Adjusted Free Cash Flow for Q1 2025 was $5.7 million, compared to $4.7 million in Q1 2024[31]