• Total Revenue: $40.1 million for the third quarter of 2024.
• Tool Rental Revenue: $28.1 million in the third quarter.
• Product Sales Revenue: $12 million in the third quarter.
• Operating Expenses: $35.8 million in the third quarter.
• Income from Operations: $4.3 million in the third quarter.
• Adjusted Net Income: $4.6 million in the third quarter.
• Adjusted Diluted EPS: 14 cents per share in the third quarter.
• Adjusted EBITDA: $11.1 million in the third quarter.
• Adjusted Free Cash Flow: $7.8 million in the third quarter.
• Cash Position: Approximately $12 million as of September 30, 2024.
• Net Debt: $32.1 million as of September 30, 2024.
• Maintenance CapEx: Approximately 8% of total consolidated revenue for the third quarter.
• 2024 Revenue Outlook: Expected to be in the range of $145 to $155 million.
• 2024 Adjusted EBITDA Outlook: Expected to be within the range of $38 to $43 million.
• 2024 Adjusted Net Income Outlook: Expected to be between $7.7 and $9.8 million.
• 2024 Adjusted Free Cash Flow Outlook: Expected to range between $18 to $21 million.

• Warning! GuruFocus has detected 4 Warning Signs with DTI.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DTI achieved sequential growth in revenue, adjusted net income, adjusted EBITDA, and adjusted free cash flow from the second quarter of 2024.
• The company generated $40.1 million in total revenue for the third quarter, with significant contributions from tool rental and product sales.
• DTI has been active in the M&A market, acquiring three companies in 2024 and announcing a fourth, which is expected to close in early 2025.
• The acquisition of European Drilling Projects (EDP) and Titan Tool Services expands DTI's international presence and enhances its technological capabilities.
• DTI's 'One DTI' strategy aims to integrate multiple businesses, enhance cost savings, and improve operational efficiencies across its global operations.

Negative Points

• DTI faced headwinds in the third quarter, including softness in the U.S., Gulf of Mexico, and Middle Eastern markets.
• The company revised its 2024 revenue and adjusted EBITDA outlook downward due to anticipated holiday breaks, budget exhaustion, and capital discipline by customers.
• Despite sequential growth, the increase was not as much as anticipated, reflecting ongoing market challenges.
• DTI's integration of acquired companies is complex, particularly in the Eastern Hemisphere, requiring significant management focus and resources.
• The market conditions remain soft, with potential for further rig count reductions before any uptick, impacting near-term growth prospects.

Q & A Highlights

Q: Revenue on the tool rental side was flat sequentially, but gross margins improved. Was this due to the Superior Drilling merger and cost synergies? A: David Johnson, CFO: Yes, the improvement in margins was largely due to the vertical integration with Superior Drilling Products, which benefited our drilling ream product rental. We also saw better utilization of some of our pipe, which contributed to the margin improvement.

Q: How is the integration process with Superior Drilling going, particularly in the Middle East? A: Wayne Prejean, CEO: Integration in the Western Hemisphere is complete, and teams are focused on their responsibilities. In the Eastern Hemisphere, we are organizing projects and focusing on one execution model. The rental activity is gaining traction, and we expect to see results in Q4 and early 2025.

Q: Can you provide more details on the recent acquisition of Titan Tools and how it fits into your M&A strategy? A: Wayne Prejean, CEO: Titan Tools complements our directional tool rentals platform and adds to our product portfolio with their presence in Europe. They were already our distributor in that area, making this a strategic bolt-on acquisition that enhances our infrastructure and product offerings.

Q: With the adjustment to guidance, have you started to see a slowdown in activity, and do you expect a similar trend to last year with a slow start? A: Wayne Prejean, CEO: We see a flat market with potential for some softness before an uptick. Our customers are committed to achieving production targets, and we expect activity to be performance-based with capital discipline.

Q: Despite headwinds in the US land market, you are guiding for significant free cash flow. What does this say about your business model? A: Wayne Prejean, CEO: We maintain a sustainable business through capital discipline and strategic investments in our fleet. We focus on risk-based capital investments and generating healthy free cash flow margins, which are competitive in the marketplace.

Q: Are there differences in the M&A market between North America and international regions? A: Wayne Prejean, CEO: Opportunities exist in both markets, but international deals can be less transparent due to multiple countries and complexities. In North America, acquisitions help us achieve economies of scale and competitiveness.

Q: What are your aspirations for international revenue growth with the new reporting structure? A: Wayne Prejean, CEO: We expect international revenue to grow significantly. It was 1% of our income in 2023, projected to be 10% in 2024, and we anticipate further growth in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.