8-K: Drilling Tools International Corp. Announces First Quarter 2024 Results and Reaffirms Full-Year Outlook

Drilling Tools International Corp. reported first quarter 2024 results, with revenue of $37 million and reaffirmed its full-year 2024 outlook.

Summary

• Drilling Tools International Corp. (DTI) announced its financial results for the first quarter of 2024, reporting total consolidated revenue of $37 million.
• Tool Rental revenue was approximately $30 million, while Product Sales revenue reached $7 million.
• The company's operating expenses for the quarter were $31.8 million, resulting in an operating income of $5.1 million.
• Net income for the first quarter was $3.1 million, and adjusted net income was $3.8 million.
• Adjusted EBITDA for the quarter was $10.9 million, and adjusted free cash flow was $4.7 million.
• As of March 31, 2024, DTI had approximately $14 million in cash and cash equivalents, net debt of $11 million, and an undrawn $80 million ABL Credit Facility.
• DTI reaffirmed its full-year 2024 outlook, projecting revenue between $170 million and $185 million, adjusted net income between $15.6 million and $21.9 million, adjusted EBITDA between $50 million and $58.5 million, and adjusted free cash flow between $20 million and $25.5 million.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the reaffirmation of the full-year outlook and strategic acquisitions, but tempered by the decrease in revenue and net income compared to the previous year.

Positives

• DTI's first quarter results were in line with expectations despite a competitive and flat rig count environment.
• The company successfully closed the Deep Casing Tools acquisition.
• DTI secured a new $25 million Term Loan and amended its ABL Credit Facility, strengthening its balance sheet.
• The company is actively pursuing growth opportunities through acquisitions, both domestically and internationally.
• DTI reaffirmed its full-year 2024 outlook, indicating confidence in future performance.

Negatives

• The company experienced a decrease in revenue compared to the same quarter last year, with total revenue dropping from $40.8 million to $37 million.
• Net income decreased from $5.7 million to $3.1 million compared to the same quarter last year.
• The company's operating expenses were $31.8 million, which is a significant portion of the revenue.

Risks

• The demand for DTI's products and services is influenced by the general level of activity in the oil and gas industry.
• DTI's ability to retain its customers, particularly those that contribute a large portion of its revenue, is a risk.
• The company's ability to remain the sole North American distributor of the Drill-N-Ream is a risk.
• DTI's ability to employ and retain a sufficient number of skilled and qualified workers, including its key personnel, is a risk.
• The company's ability to source tools and raw materials at a reasonable cost is a risk.
• DTI's ability to market its services in a competitive industry is a risk.
• The company's ability to execute, integrate, and realize the benefits of acquisitions, and manage the resulting growth of its business, is a risk.
• Potential liability for claims arising from damage or harm caused by the operation of DTI's tools is a risk.
• DTI's ability to obtain additional capital is a risk.
• Potential political, regulatory, economic, and social disruptions in the countries in which DTI conducts business are risks.
• DTI's dependence on its information technology systems is a risk.
• The company's ability to comply with applicable laws, regulations, and rules is a risk.
• DTI's ability to maintain an effective system of disclosure controls and internal control over financial reporting is a risk.
• The potential for volatility in the market price of DTI's common stock is a risk.
• The impact of increased legal, accounting, administrative, and other costs incurred as a public company is a risk.
• The potential for issuance of additional shares of DTI's common stock or other equity securities is a risk.
• DTI's ability to maintain the listing of its common stock on Nasdaq is a risk.

Future Outlook

The company reaffirmed its full-year 2024 outlook, which includes the impact of the Deep Casing Tools acquisition but does not include any contributions from the pending acquisition of Superior Drilling Products. The company will update 2024 guidance to include SDP once the transaction closes.

Management Comments

• Wayne Prejean, CEO of DTI, stated, 'We are pleased to report first quarter results that were in line with our expectations despite the current competitive and flat rig count environment.'
• Prejean added, 'We are very excited about our growth opportunities organically and through acquisitions, both domestically and internationally, throughout 2024 and into 2025.'
• Prejean also stated, 'We are reaffirming our full-year 2024 outlook.'

Industry Context

This announcement comes amid a competitive and flat rig count environment in the oil and gas industry, highlighting DTI's efforts to maintain performance and pursue growth through strategic acquisitions and financial management.

Comparison to Industry Standards

• While DTI's Q1 revenue of $37 million is a solid result, it is important to compare this to other oilfield service companies of similar size.
• For example, companies like Forum Energy Technologies (FET) and National Energy Services Reunited Corp. (NESR) also operate in the oilfield services sector and their quarterly results would provide a good benchmark.
• DTI's adjusted EBITDA of $10.9 million and adjusted free cash flow of $4.7 million should be compared to the margins and cash flow generation of these peers to assess relative performance.
• The reaffirmation of the full-year outlook is positive, but the actual results will need to be monitored against industry trends and the performance of competitors.
• The acquisition of Superior Drilling Products (SDPI) is a significant move, and its impact on DTI's financials will be a key factor in future performance compared to industry standards.

Stakeholder Impact

• Shareholders will be interested in the company's financial performance and growth strategy.
• Employees may be impacted by the company's acquisitions and growth plans.
• Customers will be interested in the company's ability to provide reliable and innovative drilling tools.
• Suppliers will be impacted by the company's sourcing and procurement activities.
• Creditors will be interested in the company's financial stability and debt management.

Next Steps

• DTI will update its 2024 guidance to include the impact of the Superior Drilling Products acquisition once the transaction closes.
• The company will continue to pursue growth opportunities organically and through acquisitions.
• DTI will host a conference call on May 10, 2024, to discuss the first quarter results.

Key Dates

Keywords

oilfield services, drilling tools, tool rental, directional drilling, horizontal drilling, oil and gas, EBITDA, revenue, acquisitions, financial results