Drilling Tools International (DTI) - 2024 Q1 - Quarterly Results

Executive Summary & Business Overview This section details DTI's first quarter 2024 financial and strategic performance, outlines the full-year outlook, and provides essential company and forward-looking information First Quarter 2024 Performance and Strategic Highlights DTI reported Q1 2024 results meeting expectations, marked by strategic acquisitions and balance sheet strengthening Q1 2024 Key Financial Highlights (in millions) | Metric | Amount | | :---------------------- | :------- | | Total Consolidated Revenue | $37.0 | | Tool Rental Net Revenue | ~$30.0 | | Product Sales Net Revenue | $7.0 | | Operating Income | $5.1 | | Net Income | $3.1 | | Adjusted Net Income | $3.8 | | Adjusted EBITDA | $10.9 | | Adjusted Free Cash Flow | $4.7 | - Strategic Highlights: Entered into a definitive agreement to acquire Superior Drilling Products, Inc. (SDP), closed the Deep Casing Tools acquisition, secured a new $25 million Term Loan, and amended and extended the ABL Credit Facility[4] Balance Sheet as of March 31, 2024 (in millions) | Metric | Amount | | :---------------------- | :------- | | Cash and Cash Equivalents | ~$14.0 | | Net Debt | $11.0 | | Undrawn ABL Credit Facility | $80.0 | 2024 Full Year Outlook DTI reaffirmed its 2024 full-year outlook, including Deep Casing Tools, with updates pending for Superior Drilling Products acquisition 2024 Full Year Outlook (excluding SDP, in millions) | Metric | Low | High | | :---------------------- | :---------- | :---------- | | Revenue | $170 | $185 | | Adjusted Net Income | $15.6 | $21.9 | | Adjusted EBITDA | $50 | $58.5 | | Adjusted EBITDA Margin | 29% | 32% | | Adjusted Free Cash Flow | $20 | $25.5 | - The 2024 outlook includes the estimated impact of the Deep Casing Tools acquisition but excludes any contributions from the pending acquisition of Superior Drilling Products, with guidance to be updated once the SDP transaction closes[4] About Drilling Tools International Corp. DTI is a Houston-based global oilfield services company specializing in downhole drilling tools, operating 23 service centers worldwide - DTI is a Houston, Texas based leading oilfield services company that manufactures and rents downhole drilling tools used in horizontal and directional drilling of oil and natural gas wells[9] - The company operates from 16 service and support centers across North America and maintains 7 international service and support centers across Europe and the Middle East[9] Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, potentially causing actual results to differ from projections - Forward-looking statements are subject to numerous conditions, many of which are beyond the control of DTI, including those set forth in the Risk Factors section of the Proxy Statement and described in the 10-K[10] - Key risks include: demand for DTI's products and services, ability to retain customers, ability to source tools and raw materials, market competitiveness, ability to execute and integrate acquisitions, potential liability for claims, ability to obtain additional capital, political/regulatory/economic disruptions, dependence on IT systems, compliance with laws, maintenance of internal controls, volatility in stock price, and increased costs as a public company[10] Consolidated Financial Statements - First Quarter 2024 This section presents DTI's consolidated financial statements for Q1 2024, including the statement of operations, balance sheets, and cash flows Consolidated Statement of Operations and Comprehensive Income DTI's Q1 2024 saw a 9.37% revenue decrease and 45.17% net income decline, impacted by lower sales and increased shares outstanding Consolidated Statement of Operations (Q1 2024 vs Q1 2023, in thousands) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :-------------------------------- | :-------- | :-------- | :--------- | | Total revenue, net | $36,974 | $40,799 | -9.37% | | Tool rental revenue | $29,966 | $32,276 | -7.16% | | Product sale revenue | $7,008 | $8,523 | -17.66% | | Total operating costs and expenses | $31,844 | $32,878 | -3.14% | | Income from operations | $5,130 | $7,921 | -35.23% | | Net income | $3,126 | $5,701 | -45.17% | | Basic earnings per share | $0.11 | $0.45 | -75.56% | | Diluted earnings per share | $0.11 | $0.29 | -62.07% | | Basic weighted-average common shares outstanding | 29,768,568 | 11,951,137 | +149.08% | | Diluted weighted-average common shares outstanding | 29,768,568 | 19,677,507 | +51.28% | Consolidated Balance Sheets DTI's total assets grew 25.99% by March 31, 2024, driven by acquisitions, while total liabilities increased 72.19% due to new debt Consolidated Balance Sheets (Mar 31, 2024 vs Dec 31, 2023, in thousands) | Metric | Mar 31, 2024 | Dec 31, 2023 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Total assets | $166,951 | $132,498 | +25.99% | | Cash | $14,050 | $6,003 | +134.05% | | Accounts receivable, net | $35,730 | $29,929 | +19.38% | | Inventories, net | $11,441 | $5,034 | +127.28% | | Property, plant and equipment, net | $70,596 | $65,800 | +7.29% | | Goodwill | $2,556 | $0 | N/A | | Intangible assets, net | $8,058 | $216 | +3639.81% | | Total liabilities | $75,438 | $43,809 | +72.19% | | Accounts payable | $16,736 | $7,751 | +115.92% | | Long-term debt | $20,000 | $0 | N/A | | Total shareholders' equity | $91,513 | $88,690 | +3.18% | Consolidated Statement of Cash Flows DTI's Q1 2024 saw decreased operating cash, significant investing outflow from acquisitions, and substantial financing inflow from a new Term Loan Consolidated Statement of Cash Flows (Q1 2024 vs Q1 2023, in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :-------------------------------- | :-------- | :-------- | :------- | | Net cash flows from operating activities | $3,312 | $7,089 | -53.27% | | Net cash from investing activities | $(19,585) | $(1,168) | +1576.71% | | Net cash from financing activities | $24,611 | $(7,453) | N/A (swing) | | Net Change in Cash | $8,047 | $(1,532) | N/A (swing) | | Cash at End of Period | $14,050 | $820 | +1613.41% | - Key investing activity: Acquisition of a business, net of cash acquired, resulted in a cash outflow of $18,261 thousand[17] - Key financing activity: Proceeds from Term Loan amounted to $25,000 thousand[17] Non-GAAP Financial Measures and Reconciliations This section defines DTI's non-GAAP financial measures and provides reconciliations for Q1 2024 performance and the full-year 2024 outlook Definition of Non-GAAP Financial Measures This section defines DTI's key non-GAAP financial measures, including Adjusted EBITDA, Adjusted Free Cash Flow, and Adjusted Net Income, used to assess operational performance - Adjusted EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization, adjusted for goodwill/asset impairment, stock-based compensation, restructuring, transaction/integration costs, and other non-recurring items[19] - Adjusted Free Cash Flow is defined as Adjusted EBITDA less Gross Capital Expenditures[21] - Adjusted Net Income (Loss) is defined as consolidated net income (loss) adjusted for goodwill/asset impairment, restructuring, transaction/integration costs, and other non-recurring items[22] - Adjusted Diluted Earnings (Loss) per share is the quotient of adjusted net income (loss) and diluted weighted average common shares[23] Reconciliation of GAAP to Non-GAAP Measures (Q1 2024) This section provides detailed reconciliations of DTI's GAAP net income to non-GAAP measures for Q1 2024 and 2023, clarifying operational performance Reconciliation of GAAP to Non-GAAP Measures (Q1 2024 vs Q1 2023, in thousands) | Metric | Q1 2024 | Q1 2023 | | :---------------------- | :-------- | :-------- | | Net income (loss) | $3,126 | $5,701 | | Adjusted EBITDA | $10,891 | $14,846 | | Adjusted Free Cash Flow | $4,664 | $7,779 | | Adjusted Net Income | $3,810 | $7,002 | | Adjusted Basic earnings per share | 0.13 | 0.56 | | Adjusted Diluted earnings per share | 0.13 | 0.36 | Reconciliation of Estimated GAAP to Non-GAAP Measures (FY 2024 Outlook) This section reconciles estimated GAAP net income to projected non-GAAP measures for FY 2024, detailing adjustments for expected operational performance Reconciliation of Estimated GAAP to Non-GAAP Measures (FY 2024 Outlook, in thousands) | Metric | Low | High | | :---------------------- | :-------- | :-------- | | Net Income | $15,000 | $21,000 | | Adjusted EBITDA | $50,000 | $58,500 | | Adjusted Free Cash Flow | $20,000 | $25,500 | | Adjusted Net Income | $15,600 | $21,900 | Additional Information This section provides details for DTI's conference call and investor relations contact information Conference Call Information This section details access information for DTI's Q1 2024 conference call, including live options and archives - DTI's first quarter conference call was scheduled for Friday, May 10, 2024, at 11:00 a.m. Eastern Time[8] - Access options included live dial-in (1-201-389-0869) or live webcast (https://investors.drillingtools.com/news-events/events)[8](index=8&type=chunk) - An audio replay was available through May 17, and a webcast archive for 90 days[8] Investor Relations Contact This section provides contact information for DTI's Investor Relations team - Investor Relations Contacts: Ken Dennard / Rick Black[10] - Email: InvestorRelations@drillingtools.com[10]