Drilling Tools International (DTI) Q2 2024 earnings summary

Executive summary

• Closed major acquisitions of Superior Drilling Products, Deep Casing Tools, and Casing Technologies Group in 2024, expanding technology, product offerings, and international reach, especially in the Middle East.

• Implemented a $2.4 million annualized cost reduction program to address North American market softness and maintained profitability despite lower rig counts and pricing pressures.

• Achieved 17% year-over-year revenue growth and 24% Adjusted EBITDA growth in 2023, driven by organic expansion and acquisitions.

• Operates a fleet of 65,000+ rental tools from 16 North American and 10 international service centers, serving a blue-chip customer base.

• As of June 30, 2024, cash and cash equivalents were $6.8 million, with an accumulated deficit of $3.1 million.

Financial highlights

• Q2 2024 consolidated revenue was $37.5 million; tool rental net revenue $28.3 million, product sales $9.2 million.

• Q2 operating income was $2.2 million; Adjusted EBITDA was $9.0 million; net income was $0.4 million ($0.01 per share).

• Adjusted net income for Q2 2024 was $3.0 million, or $0.10 per share; adjusted free cash flow was $(1.1) million, a $3.2 million improvement year-over-year.

• For FY 2023, revenue was $152 million, Adjusted EBITDA $41.2 million, Adjusted Net Income $19.2 million, and Adjusted Free Cash Flow $7.3 million.

• As of June 30, 2024: $6.8 million cash, $17.4 million net debt, $80 million undrawn ABL facility, $74.1 million total liabilities, $92.8 million shareholders' equity.

Outlook and guidance

• 2024 revenue guidance is $155–$170 million; Adjusted EBITDA $41–$47 million with margin of 26–28%.

• Adjusted net income expected between $9.9–$13.5 million; adjusted free cash flow guidance at $20–$25 million, more than double 2023.

• Guidance includes contributions from recent acquisitions and assumes continued softness in North American rig count, with international markets expected to be stable to growing.

• Management expects tool rental and product sales to increase over time with drilling activity, pricing, and market share gains.

• Existing cash, operations, and available credit are expected to be sufficient for at least the next 12 months.