Sign in

You're signed outSign in or to get full access.

DT

Drilling Tools International Corp (DTI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose to $42.88M (+7.6% q/q; +16.0% y/y) on stronger tool rentals and product sales; Adjusted EBITDA was $10.75M (essentially flat q/q; +y/y), while GAAP diluted EPS was -$0.05 due to a $1.9M non-cash goodwill impairment; Adjusted diluted EPS was $0.02 .
  • Against S&P Global consensus, DTI delivered a clean beat: Revenue $42.88M vs $38.53M*, Primary EPS (S&P normalized) $0.02 vs -$0.01*, and EBITDA $10.75M vs $9.32M* (consensus coverage thin at 1–2 estimates)*. Values retrieved from S&P Global.
  • Management cut FY25 guidance on macro/rig softness and pricing pressure: Revenue to $145–$165M (from $163–$183M), Adjusted EBITDA to $32–$42M (from $40–$50M), Adj. FCF to $14–$19M (from $17–$21M), and Adj. EBITDA margin to 22–25% (from 25–27%) .
  • Board authorized up to $10M share repurchases, signaling confidence and adding a capital-returns lever amid volatility .
  • Stock reaction catalysts: estimate beat vs low expectations, but guidance cut and tariff/rig-count commentary imply near-term margin pressure; buyback may support shares on weakness .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue growth amid a declining global rig count, driven by rental mix and product traction; revenue +16% y/y and +7.6% q/q with Adjusted EBITDA up ~18% y/y; CEO highlighted resilience despite headwinds .
    • Strategic progress: integration and product expansion (RotoSteer, MechLOK swivel, Rubblizer) supporting rental mix and international traction; management expects better cost absorption ahead .
    • Capital allocation: initiation of up to $10M buyback reflecting perceived undervaluation and balance sheet flexibility .

  • What Went Wrong

    • Guidance cut on tariffs, recession fears, OPEC+ output, U.S. land rig softness and pricing pressure; FY25 revenue/EBITDA/FCF ranges all lowered .
    • GAAP loss (-$1.67M) due to non-cash goodwill impairment tied to Vernal, Utah bit repair and deep casing tools reporting units; while non-cash, it pressured GAAP EPS .
    • Margin pressures from pricing and mix; management expects pricing-driven compression in 2H25 despite cost actions (targeting ≥$6M annualized savings) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($M)40.09 39.85 42.88
GAAP Diluted EPS ($)0.03 -0.04 -0.05
Adjusted Diluted EPS ($)0.14 0.02 0.02
Operating Income ($M)4.25 1.81 3.30
Adjusted EBITDA ($M)11.13 9.12 10.75
Adjusted Free Cash Flow ($M)7.76 5.91 5.71

Segment/Revenue Mix

Revenue Detail ($M)Q3 2024Q4 2024Q1 2025
Tool Rental28.12 31.52 34.53
Product Sales11.98 8.33 8.35
Total40.09 39.85 42.88

KPIs and Balance Sheet (Quarter-End)

KPIQ4 2024Q1 2025
Cash & Equivalents ($M)6.19 2.79
Net Debt ($M)47.6 52.1
Revolving Line Balance ($M)27.14 30.00
Gross Capital Expenditures ($M)3.21 5.04
Cash from Operations ($M)6.06 (FY Q4 period shown) 2.43
Eastern Hemisphere revenue mix (%)~10% FY24 (context) 11% Q1 2025

Estimate vs Actual – Q1 2025 (S&P Global consensus)

MetricConsensus*Actual
Revenue ($M)38.53*42.88
Primary EPS (S&P normalized) ($)-0.01*0.02 [GetEstimates Q1 2025]
EBITDA ($M)9.32*10.75

Values marked with * are retrieved from S&P Global (via GetEstimates).

Guidance Changes

MetricPeriodPrevious (3/13/25)Current (5/13/25)Change
RevenueFY 2025$163–$183M $145–$165M Lowered
Adjusted EBITDAFY 2025$40–$50M $32–$42M Lowered
Adjusted EBITDA MarginFY 202525–27% 22–25% Lowered
Adjusted Free Cash FlowFY 2025$17–$21M $14–$19M Lowered
Gross Capital ExpendituresFY 2025$23–$29M $18–$23M Lowered
Share Repurchase AuthorizationN/ANone disclosedUp to $10M New program

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current (Q1’25)Trend
Macro/rig counts, pricing pressureSoft U.S. land/Gulf/Middle East; cost program; revised 2024 outlook Expect increased volatility; U.S. rig declines and pricing pressure to weigh on margins Deteriorating 2H risk
Tariffs/tradeMonitoring; diversified supply/manufacturing seen as mitigants Cited tariffs as risk; believe input costs insulated; watching policy shifts Elevated uncertainty
International/Eastern HemisphereBuilding EH platform via DCT/SDP/EDP; mix to reach ~10% in 2024 EH at 11% of revenue; expecting growth as year progresses Growing mix
Product innovationDrill-N-Ream traction, vertical integration benefits RotoSteer, MechLOK swivel, Rubblizer gaining traction; offsets weakness in deep casing Positive adoption
Cost actionsCost reduction program initiated in late 2024 Two-phase cost program; ~$6M annualized savings targeted from Q2 Accelerating
Capital allocation2025 capex to support EH growth; leverage mindful Introduced $10M buyback; optionality to adjust debt/capex More shareholder focus

Management Commentary

  • “We are pleased to report first quarter sequential and year-over-year revenue growth and solid adjusted EBITDA despite industry headwinds.” – CEO Wayne Prejean .
  • “We see increased volatility and uncertainty… tariffs, recession fears… OPEC+’s decision to increase production… we implemented a program to cut expenses by approximately $6 million this year.” – CEO .
  • “We recorded a noncash goodwill write-down… attributable to… Vernal, Utah bit repair… and deep casing tools… does not affect liquidity, free cash flow or adjusted EBITDA.” – CFO David Johnson .
  • “Our diversified manufacturing base and supply chain… and ability to curtail growth CapEx… insulate us from tariff risk.” – CEO .
  • “Western Hemisphere steady; Eastern Hemisphere choppy due to deep casing tools exposure… expect EH contribution to grow as the year progresses.” – CFO .

Q&A Highlights

  • Free cash flow durability: Cost reductions and capex timing underpin FCF despite expected 2H softness; ability to defer growth capex if needed .
  • Eastern Hemisphere outlook: Saudi offshore rig reductions and Mexico weighed on deep casing sales; traction improving via ED Projects technologies and D&R tools .
  • Quarterly cadence: Company views the rest of the year holistically; anticipates U.S. softness and Canadian seasonality; difficult to pinpoint intra-year trajectories .
  • Interest expense variability: Range depends on debt reduction versus buybacks and capex pacing .
  • Capex priorities: Focused on growth tools (stabilizers, swivels, RotoSteer) while sustaining legacy rental fleet; nimble to curtail if macro worsens .

Estimates Context

  • Q1 2025 vs S&P Global: Revenue $42.88M vs $38.53M*, Primary EPS (S&P normalized) $0.02 vs -$0.01*, EBITDA $10.75M vs $9.32M*; beats across all three metrics (note normalized EPS compares to S&P “Primary EPS,” which may differ from GAAP diluted EPS) . Values retrieved from S&P Global.
  • Consensus breadth is limited (1–2 estimates), increasing dispersion risk*.

Key Takeaways for Investors

  • Q1 delivered a solid top-line and EBITDA beat vs S&P consensus despite macro softness, aided by rental mix and integration benefits .
  • Guidance reset lower on tariffs/pricing/rig count caution; expect margin compression in 2H25 even as cost savings begin to flow through .
  • Non-GAAP adjustments matter: a non-cash goodwill impairment drove GAAP loss; operational performance better reflected in Adjusted EPS/EBITDA .
  • Eastern Hemisphere is becoming a more meaningful growth vector (11% mix), helping offset North American softness; product innovations (RotoSteer, MechLOK, Rubblizer) support rental growth .
  • Capital allocation now includes buybacks (up to $10M), creating support for the equity and signaling confidence in medium-term value .
  • Near-term trading setup: beats vs low expectations + buyback support vs guidance cut and 2H pricing pressure; watch updates on cost savings realization and EH contribution ramp .
  • Medium-term thesis: diversified footprint, accretive M&A, and technology-led rental mix position DTI to expand margins as activity stabilizes and pricing pressure abates .

Notes: Values marked with * are retrieved from S&P Global (via GetEstimates).