Drilling Tools International Corp (DTI)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $39.4M, up 5.0% YoY but down 8.1% sequentially; GAAP diluted EPS was -$0.07 and Adjusted diluted EPS was -$0.02 . Adjusted EBITDA was $9.3M with a 23.7% margin, and Adjusted Free Cash Flow was $1.8M, the first positive Q2 FCF since becoming public .
• Versus S&P Global consensus, Q2 revenue slightly missed by ~1%, Adjusted EPS missed by $0.03, and EBITDA missed by ~21% as S&P tracks a different EBITDA definition than management’s Adjusted EBITDA (see Estimates Context)*.
• Management maintained FY2025 guidance (Revenue $145–$165M, Adj. EBITDA $32–$42M, Adj. FCF $14–$19M) amid expected back-half margin compression from pricing pressure; cost-cut program of ~$6M is on track or better .
• Catalysts: maintained guidance and cost cuts, Eastern Hemisphere traction (approx. 14% of Q2 revenue), and continued buybacks ($0.6M at ~$3/share in Q2) could support sentiment despite pricing pressure and rig declines .

What Went Well and What Went Wrong

• What Went Well

  • Eastern Hemisphere momentum with first positive Adjusted EBITDA month for Drill-N-Ream; segment contributed ~14% of Q2 revenue and grew strongly QoQ (“grew revenue by 46%” per release) . Quote: “Our Eastern Hemisphere segment grew revenue by 46% and contributed approximately 14% of our total revenue in the current quarter.” — Wayne Prejean .
  • Delivered Q2 results ahead of internal forecasts and first positive Q2 Adjusted FCF since becoming public . Quote: “This enabled us to deliver financial results that exceeded our internal forecasts… our first positive Adjusted Free Cash Flow for any second quarter since becoming public.” — Wayne Prejean .
  • Cost actions and disciplined capital allocation (maintenance CapEx ~10% of revenue; Q2 buybacks of ~$0.6M) support margins and per-share value .

• What Went Wrong

  • Pricing pressure emerging; management expects margin compression in H2 2025 despite stable commodity prices and cautious customers .
  • Product sales softness in deep casing tools due to Saudi offshore and Mexico rig declines; Western Hemisphere down from Q1 .
  • Consensus misses vs S&P Global: Adjusted EPS (-$0.02 vs $0.01 est), revenue (~$39.4M vs ~$39.8M est), S&P EBITDA ($7.5M vs $9.6M est), evidencing demand/pricing headwinds and mix shifts*.

Financial Results

Segment breakdown

KPIs and cash/leverage

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus and forecast discipline: “We are pleased to report that second quarter year over year total revenue grew nearly 5% and adjusted EBITDA grew 4%. This tracks ahead of our forecast plan…” — Wayne Prejean .
• Cost program execution: “We implemented a program in 2025 to cut expenses by an annual $6,000,000… we are on track to exceed this goal.” — Wayne Prejean .
• Eastern Hemisphere traction: “Our Eastern Hemisphere segment grew revenue by 46% and contributed approximately 14% of our total revenue in the current quarter.” — Wayne Prejean .
• Capital allocation: “We repurchased $600,000 of DTI common stock at an average price of $3 per share.” — David Johnson .
• Outlook caution: “We believe that margin compression from pricing pressure will emerge in Q3 and Q4, while activity declines may continue…” — David Johnson .

Q&A Highlights

• Margins resilience and cost cuts: Analysts probed how margins held up amid rig declines and international expansion; CFO noted muted pricing pressure in Q2 with greater impact expected in Q3–Q4, and that cost reductions will benefit H2 more than Q2 .
• Pricing dynamics: Pricing pressure largely customer-driven negotiations rather than competitor dumping; focus is on maintaining incumbency and value .
• Geographic exposure: Stable presence in U.S. gas basins (Haynesville, Northeast) and strong Canada operations provide diversification .
• EH growth drivers: Post-acquisition traction from Titan Tools and Drill-N-Ream fleet utilization in Middle East; expanding offerings (MechLOK swivels, Rubblizer) .
• M&A environment: Meaningful dialogue continues with bolt-on/tuck-in targets across both hemispheres; balance sheet positioned to support strategic deals while managing leverage .

Estimates Context

Notes: Values retrieved from S&P Global. Management reported Adjusted EBITDA of $9.3M (non-GAAP), which differs from the EBITDA definition commonly used in consensus tracking . Adjusted diluted EPS of -$0.02 aligns with S&P’s “Primary EPS” actual .

Key Takeaways for Investors

• The quarter was resilient operationally (YoY revenue +5%, Adjusted EBITDA +4%) but faced pricing/mix pressures; consensus misses likely prompt near-term estimate reductions, especially on H2 margins* .
• Maintaining FY2025 guidance with explicit margin compression commentary suggests a prudent stance; monitor H2 pricing dynamics and utilization in Western Hemisphere .
• Eastern Hemisphere execution is an emerging positive offset (≈14% of revenue, positive DNR EBITDA month); watch conversion of EH pipeline into sustained revenue/EBITDA .
• Deep Casing Tools weakness is cyclical; management expects gradual improvement as Saudi/Mexico rigs normalize and inventories draw down .
• Cost program (~$6M) and lower H2 CapEx underpin FCF; positive Q2 Adjusted FCF in a seasonally weak quarter is notable .
• Share repurchases at ~$3/share indicate confidence in intrinsic value; balance sheet flexibility remains for selective M&A alongside debt paydown .
• Trading lens: Narrative hinges on delivery vs maintained guidance, visible EH growth, and pricing pressure severity; any easing in pricing or faster EH scaling would be a catalyst.

Cross-references and clarifications

• Eastern Hemisphere sequential growth was cited as +46% in the press release vs +21% on the call; both affirm rising EH contribution, but investors should note the discrepancy in reported growth rates .
• Non-GAAP adjustments materially impact reported profitability; Adjusted EBITDA and Adjusted EPS provide a better view of operating performance than GAAP EPS for DTI this quarter .