Drilling Tools International Corp. Q3 FY2025 earnings call

• Proactive communications with customers and flexible pricing options stimulated higher activity levels, offsetting pricing concessions. - Demonstrated financial discipline by paying down $5.6 million in debt, increasing cash by $3.2 million, and buying back $550,000 of common shares. - Made progress on strategic initiatives, including integration of recent acquisitions in the Eastern Hemisphere, with significant increase in DNR tool fleet utilization in the Middle East and Eastern Hemisphere. - Relocated U.S. Drill-N-Ream repair facility from Vernal, Utah to Houston, Texas, ahead of schedule, delivering cost savings. - Expect to integrate all Eastern Hemisphere operations into one centralized accounting platform by end of December 2025, going live in January 2026.

In the third quarter, total consolidated revenue was $38.8 million. Tool rental revenue was $31.9 million, and product sales revenue was $7 million. The Eastern Hemisphere operations grew revenue by 41% year-over-year and contributed approximately 15% of total revenue in the third quarter.

• Reaffirmed 2025 full-year guidance: revenue $145 million to $165 million, adjusted EBITDA $32 million to $42 million, CapEx $18 million to $23 million, adjusted free cash flow $14 million to $19 million. - Adjusted cost-cutting plan as customer activity offset price discounts, now anticipating $4 million of cost cuts instead of $6 million originally planned.

• Geopolitical uncertainty enhancing volatility in oil and gas markets, leading to pricing pressure and utilization disruptions.

Q: Steve Ferazani asks about U.S. vs Eastern Hemisphere utilization, product sales holding up.

A: Wayne Prejean responds that they've won business in North America through RFQs and tenders, maintained business with existing clients despite rig count decline. Eastern Hemisphere has optimism with Saudi and UAE showing activity, and they're positioned to benefit from unconventional gas uptick.

Q: Sean Mitchell asks about lessons from Middle East acquisitions and M&A opportunities.

A: Wayne Prejean mentions historical international rig count being NOC-driven, recent Saudi rig drop was an outlier, and they're focused on executing acquisitions, with lessons learned to stay focused on execution, and looking at M&A opportunities in U.S. and international regions