Drilling Tools International (DTI) - 2025 Q2 - Quarterly Results

Executive Summary & Outlook Second Quarter 2025 Financial Highlights 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 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] - 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] - Despite market softness, consolidated Revenue and Adjusted EBITDA grew by 5% and 4% year-over-year, respectively[5] - 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] Full Year 2025 Outlook 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 Consolidated Statements of Comprehensive Income (Loss) 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 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 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 Definitions of Non-GAAP Measures 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] - Adjusted Free Cash Flow is defined as Adjusted EBITDA less Gross Capital Expenditures[8][24] - Adjusted Net Income (Loss) excludes items such as goodwill impairment, restructuring charges, and transaction costs to better reflect ongoing performance[26] Reconciliation of GAAP to Non-GAAP Measures 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 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) 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 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 |