DTI - Earnings call transcript Q3 2024 | Drilling Tools International Corp.

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Operator

Greetings, and welcome to the Drilling Tools International Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Ken Dennard. Thank you, sir. Please go ahead.

Unknown Executive

good and operator, you, morning, everyone. Thank you Third Quarter appreciate joining us XXXX International's Tools Drilling Conference for We Call Webcast. and Chief today me and are Prejean, Financial Johnson, Chief Officer. With Executive Wayne David Officer;

will this that will States reflect provide the note any updated the forward-looking be There replay call be of XXXX, available advised that time-sensitive until XX, the information Also, opening also November listening will or Following may the meaning my of time United of a before and transcript website remarks, be on a of at laws. the of as results forward-looking XX. outlook your on current third for contain November speaks call recorded securities on that will replay of telephonic will of reading. by management. company's replay this no call information today, as review drillingools.com, the statements are be and statements reported any therefore, DTI's webcast comments the and quarter These you longer federal views questions. there a call within only accurate management today's available Please

limited reports EBITDA on financial reports could also cause non-GAAP comparable the and adjusted and non-GAAP informational for and read to, the X-K these now include current GAAP uncertainties GAAP directly to will annual in However, comparable various not contingencies. We and cash why the of in flow. are from directly and included, Form reader in on Wayne? today encouraged to results, certain by Chief risks, but adjusted limitations measures these provide or A most free most purposes, And earnings is not measures quarterly uncertainties understand comments I'd the XX-Q Form useful to release be and reconciliations results materially using management. certain performance The isolation filings report those or made of Wayne certain we risks Form achievements investors, from over statements actual contingencies differ that the expressed those non-GAAP The XX-K, listener call discussion and believe of found measures DTI's to considered like measures. turn should with Prejean, in our me, be they these measures to SEC. can Executive Officer. the behind the to on and with to

R. Prejean

and call morning, everyone. opening before it we David Thanks, comments provide I return with the questions. hand for to remarks, good Ken, the open up through and to some closing numbers will go

Let's get started.

As after you released third results our saw we yesterday, quarter market.

continue count third softness headwinds land, and in Middle U.S. Eastern the of rig including experience quarter, Gulf Mexico to U.S. in markets. We

EPS, income, diluted However, adjusted pleased adjusted grown and sequentially cash to adjusted second we are from net flow our adjusted free revenue, results. our XXXX EBITDA our have quarter

In financials Our the outlook. we was at in than came the million will through revised XXXX. cash free provide a year entire EBITDA million, adjusted million. $XX.X detail in $X.X Adjusted $XX.X which more moment, our total flow for you cash flow quarter. and adjusted David more take produced revenue is and of the free was in

tools order going in to last casing expected goal to premier servicing year, have to the installation in market, that wellbore become active provider of public close and companies To need since been we market our accomplish been scale. end, announcing quarter a acquiring fourth, first construction have which XXXX drilling for In this and As XXXX. we the is we X the saying extremely is in goal, solution the rental segments. M&A

and year are currently we integrating and were this Superior two first Drilling operating. which Our deep acquisitions casing Products,

about detail spoken in have calls. past on these We

the Limited, acquisition X. Services a Drilling XX Titan rental We an include to subsequent third on U.K.-based we short, Projects, we announced company. on EDP that deals for or X with latest of a announcement acquire end that which downhole signed October Tool to Our tool European followed quarter agreement the October the closed of definitive

with addressing these further global rentals wellbore and wellbore provider offer for reamers drilling such segment EDP, complements bring drilling. property of and as They established a We're drilling and in and construction optimization to start with known by expansion complementing is can next-generation Let's penetration directional Drill-n-ream. specialty along our portfolio, our our additional EDP's which the DTI's key reach premium technologies to the technology market market unique directional stabilizers, solutions customers, cutting-edge solutions excited horizontal issues we strategies. tool value-added many faced wellbore tools characterized with Eastern offer industry. Hemisphere global optimization commoditization. personnel, tool technology innovative securing our intellectual a to By technology, extended EDP's typically footprint division,

an members East spent businesses multiple with I segue DTI. XXXX. in processes a update recently and strategy and to industries in around Titan's new and oil operating to Moving we Middle line weeks beginning a simple. to team technology ownership. me all combining our call a good solutions more in North will service groups our demonstrate market better drilling region where our our acquisitions with by Titan, to our us integration tools Integrating their and worldwide. This expertise Europe customers suite the on coalesced have strong in the international product markets international DTI's and and on commitment path operations Together, international to of comprehensive and and downhole allow presence offer gas provide focus we be expansion able to for two Sea, support, never our reviewing By serve Africa is to we'll is geothermal One the geography. drilling

leadership focus important will a unit business accountability structure appropriate established have the sales efforts. and region. We and This for in Hemisphere new Eastern facilitate our on team this

strategy growth The in goal giving Abu ADIPEC with our in focus across common DTI success global Dhabi foster further our While cost I team annual One teams objectives. engagement, establish and convention and on international East, and periods. was structure our enhance optimism DTI in synergies, accountability the exhibited to better goals to future organization is alignment for for firmly the for savings, Middle and maximize great at us our

our from first to will parties, of Hemisphere systems organization forward Our our best to collating to results employees adopting are conference our system and One call. and we progress our implemented processes Eastern Compass in We structure is We reporting that XXXX. DTI newly a adopt have to all accountability. next businesses systems practices in platform operations migrating maximize immediately approach believe for shareholders. excellent common DTI best-in-class and look and Asset on accounting the will the half customers, our Management an and and generates from These minimize be acquired replication quarter's our and

We our continue there consolidation to believe are sector. that exist meaningful in opportunities

so the consolidate, must customers space. OFS our As

that tool for solid robust and allow companies selectively pipeline the strategically a that process meet to have We and our oilfield growth M&A plan. criteria and numerous will consolidate us product rental service,

have process achieve proven and a team strategies. We to these integration

growth the sequential footprint, performance-driven our recover. much markets quarter best-in-class our believe will our offerings, we coming global anticipated, with differentiated had growth deliver we geographic as While as in technologically solid not as expanded combined years this energy was

the that in implemented call, additional annualized discussed may adjustments cost subject given market an our program softer to reduction we $X.X a be savings for last conditions. we million As of

available. our our activity are in adjust we operations where And continue opportunities for appropriately boost markets those our ways to to continue We for initiatives as calibrate efficiencies and levels. to will other pursue DTI, look One to operational growth

for natural Looking demand energy and to come to gas strong, accommodate positioned forecasting rising longer term, David demand particularly outlook centers. for are it medium- remain very and our is of with Many growth DTI and robust. online industry CFO, XXXX anticipated to outlook. new with the capacity the financial rapidly long-term this With results industry well trends to that, a experts in review data LNG over our that the I'll David? XXXX slated demand of electricity trend. Johnson, turn is

David Johnson

yesterday's everyone, this offer time financial into today. thank detailed the I'll and insight joining to financial Wayne, so further use metrics Thanks, release, us quarter. we for provided tables, you, third In for earnings specific

rig we're As but diluted during DTI we adjusted net adjusted adjusted million increase quarter generated synergy cash $XX.X XXXX. revenue flow adjusted total revenue, and third the XXXX. near-term consolidated quarter Wayne income, quarter impacted EPS, continued that EBITDA sequentially count saw of to free realization, softness of from of second third able mentioned, the the in

were and million $XX.X an the Third diluted sales million, was income from third share. quarter operations EPS expenses million. Adjusted revenue $X.XX and was per $XX tool million. net $XX.X adjusted income which represents of was rental Operating totaled $X.X revenue $X.X for million quarter product

which quarter, cash generated flow million. of And $XX.X adjusted Third XXXX. $X.X quarter the the adjusted adjusted all more EBITDA million flow was in third cash free free than we in was is

of of and translating As count due fewer rig and CapEx drilling of our we lower the on in debt our X% trended $XX had approximately third September $XX.X into customers' revenue. net capital approximately XXXX, events. XX, consolidated hole This million. investment repair XXXX this of and of portion was of Maintenance decline in has for quarter to total million the year cash efficiencies focus damaged lost beyond

funded a sustainable is tool the fleet trend. which regardless our recovery relevant tool our keeps of rental and As capital by maintenance reminder, revenue,

Now moving on to our outlook.

employed holiday of which due the exhaustion include breaks, revising $XXX quarter. anticipated capital slowdown and range in being to $XXX in be now We our million. by to our ranges, XXXX revenue customers XXXX expect are a fourth the sequential million We discipline budget to

which in of this disclose in report from Hemisphere. expenditures the not December X flow in Previously, Starting in to estimate $XX CapEx, curtailed this company's Hemisphere when our $X.X our be for to did a is its and of mix net ending within believe will with total planned on flow CapEx operations this half reporting transparency have in first And be expected results. fourth and grow deferred section. our objectives, One was $XX capital or $XX and to and expect remains we will EBITDA other XX, company million. operating income XXXX. global XX-K enhancing We us XXXX financial for our between conservatively review to revenue revenue are we million manage the adjusted to million million million. We X% reporting $XX to allocate Wayne the our of will report Western to concludes reflected Form regions. approximately XXXX, since structure discussed XX% our range year cash earlier. that our annual effectively cash XXXX. year, more the to or adjusted segments, between $X.X The segments. than be double We DTI finally, growth and aligns of year expected in aligning be between free commitment from our adjusted we $XX and resources range different the outlook million. expect majority business Gross the Adjusted new change and footnote reported perfectly results $XX incurred Eastern million Eastern to will reflects the our disclosure, the quarter year for free more we -- full That Hemisphere million and full strategy X with enable with better 'XX across my transitioning more be to and as

turn comments some back provide summary taking now Wayne your over it me to to questions. Let before

R. Prejean

David. you, Thank

we Titan talented up to quarter XXXX. the look and welcome Before joining want I EDP's DTI line we the the for organization, to forward team us questions, in first of team to the open

these to an a resourceful evolving Casing, pricing technological to profitable the our our as enhanced combating conclusion, be like we continue deep market products and leader and first, have and SGP, In expanded One and add reemphasize soon to despite of with while to that: access services wider able the we position even will are provide I geographical to DTI conditions, with innovative be would the soft of Titan, customers organizations. energy our integrate EDP addition and we DTI capabilities array pressures. purposefully landscape. competitive we believe quality As and We and in footprint, continue greatly will

our to to program reduction continue evaluate cost adjust we conditions. Second, market to

and DTI the recovers As to performance, measures personnel, we practices. will demand, we be when well near-term with take and positioned implement all the will to strategy, best out our believe stronger to we come One best processes, on we additional market products aligned adjust lower

believe especially attractive oilfield our sincerest services express continuous strategy, gratitude our will for thoughtful I Third, consolidation to elevated the globally. dedication We inspired is we of to execution I finish to with This no experienced. the in my With the in like take cycle. to and growth initiatives. of supplement for that and should believe productive their in of driving need next growth very X- member pleased again extend are DTI their further services finally, strengthen working our acquisition team every the successfully headwinds opportunities We solutions, exist my organic for Operator? The line. would that, industry expected been has of the our growth we your questions. multiples critical technology, appreciation high-quality in success, positions to and light products will our our employees participate safe, a companies acquiring contributions. demand additional has X-year our And there at our commitment now our manner. in DTI heartfelt

Operator

Jeff Alliance Grampp [Operator comes Partners. Instructions] Our first of the line with Global question from

Jeffrey Grampp

the was of tool flat sequentially, side first gross margins I rental pretty noticeably. on was but to improved Revenue curious things. start pretty

wanted So merger know benefit I cost that a of expecting to dive some Drilling we the synergies. into Superior some I more. bit those were and just from

of I going wanted on largely that So to just was of and kind forward? continue level expectations going factors if to kind Any that. confirm other it

David Johnson

that Jeff, that Drill-N-Ream integration kind you to rental. of our Happy benefiting think happy question. I the is drilling product -- of it. Superior A hit vertical Yes, is products the David. on of due take to this lot

costs So on of a those business through that lot acquisition. improved of that the from margins the side flowed and

we our get on we benefited a pipe, utilization bit well. had accretive that margin when our think some little as pretty that also margins better I that's and a of utilization

Jeffrey Grampp

were Middle some the area Superior Appreciate the know an that. touch side the revenue upside just of about also Drilling Great. was I of integration you guys how for that that maybe sticking things. is process the on about And And you for as Drill-N-Ream. guys excited well. Can synergies have potential on particularly going? guys you talked East then the

R. Prejean

We've the Eastern in Hemisphere on Wayne. focused is that's this our each completed and them integration with and in Jeff, responsibilities, team respective Yes, have well the Western their Hemisphere, going of mentioned of team the in meeting in along few I've trying as with organize weeks, the multitude spent deep to members lot there last a casing with time call, various the rental get the and execution focused is activity motion SEP and get starting to one and us EV projects team and in and model, to all that's on traction. going well the in in some we come should see the QX as there the EDP acquisition of that the with with early We build of fruition to and and XXXX SDP. hopefully momentum integration

albeit the in very is but a big direction. is a East was it being And with for before definitely moving that's right rigs to So very the Middle say still not it going not opportunity like few I'm us. but idled, soft, vibrant market market, vibrant overly

Jeffrey Grampp

are a in of more Great. slide side you If the that I could targets updated M&A one sneak guys still things. presentation referenced on The working of handful on.

geographic in lines. had And terms continue focus, been smaller, obviously the just I a of a comfort size, things. broadly but just some wondering, have I share XXXX active So along in M&A anything then was maybe have you level be of the guys kind you hoping active overall could just flavor a know to of of on deals. side little them to very of those terms

R. Prejean

deals on, pipeline opportunity are are of continue So M&A and and sense to think find into of the strategy. consists work feed doing to for that that types make our to some tuck-ins there we're pick transformational landscape mergers for of looking that what out from the and best going everything we the we're opportunities

within sellers range narrowing and arbitrage is I between that is and makes mergers consolidations the we the think still and ever. understand this trending because of valuations than industry think And way the market. buyers now and sellers sense and are they're So buyers definitely cooperation people more bound type the the out there, and between

pursue think there and I to continue So out opportunities, we'll us. those they're for

Operator

Company. & Steve of the next question. comes Ferazani from your with Our line proceed question Sidoti Please

Steve Ferazani

focus I EDP, help tools more fits fit in premium Tools the different markets. by how the understand us bit on acquisitions Can the with The up exposure. you just Tools seemed you let on beyond getting I M&A recently, follow Titan Titan want M&A a little X topic. me you to understand there the international start made -- international strategy?

R. Prejean

platform directional a is Titan Steve, we're the rentals basically across tuck-in also Yes, nice with where tool written our tools segment. BHA

presence I In There's and their addition, of and they in hole Europe places from particularly for them area. other a is there. incubators that have openers also technology lines like the Africa our portfolio. about product What and that that, Aberdeen bring to initiate many, West and add usually many projects lot originate they like

a And our somewhat partnered with addition to products bring we geographic many that for in of they them were as were do. they nice distributor already what So area. we our already

is a for us with of with nice and that group us other of products. more cultural this well So a launch our bolt-on and good facilities a more us help couple that aligns

better together, infrastructure, offering. better better gives all blended So us spread and it portfolio

Steve Ferazani

helpful. to Great. surprise. The adjustment That's is not guidance a

I saying? And to was you're but of we there XXXX but started couple you year, rig is I held ramped have if Would sense, saw add of start know to more it a up. the heard I question; customers see season, that spreads before exhaustion counts very budget your then expect Or repeatedly similar the happen, through up. earnings that end I what in a are last that the last fairly slow to trend? down slowdown weeks, want are at frac think yet? latter to you get the we've season. could

R. Prejean

organized ever is most it's an our downturn based the we flat feel needs. of. So But flattish and production customers' been said we've kind To ourselves activity market. question, of just a it part answer on and your among reality adjustment we see been downturn a we joke this the is of stable

see got and U.S. softness I rig more, have of target. said and before commitment, count are that's the they will. I that companies do we our And see of North and And in to many the achieve to they the takes, the discipline. we under we international gas a business, oil some base they whatever has customer stated right! certain But them operating all flow. need might If based, ebb think they've goal more footage our even a that in If capital think the markets, made I particularly can We And to some is less will. performance-based. going uptick. approach a America. what it's them do. on Its they operate as And they'll it with theme, same production think rigs, thematic follow

Steve Ferazani

the the think we clearly, than year, amount beginning at this thinking and of about got a it were challenging probably the land in what of When year. U.S. of us lot more headwinds

still model? business for What's of flow. in $XX You're there cash from tool almost the guiding range model free adjusted the million and message rental the in your

R. Prejean

our like always downs sustainable capital to business. a and we And and do to for discipline we're same ups is do reward the customers. investments to that we way our choose to feel we run don't what in we the despite mindful a of the market, mentioned are the I We just So equivalent can make the feel it market. in that at is is position investments market make making to we many where support But aspirational the risk. you time, too fleet of sustainable, going

So marketplace. capital in think competitive cash free margin strategic I the generate a I fleet, disciplined materials very is flow what that healthy can have, we risk-based and customers your knowing in think peer investment it's

Operator

with Our Daniel question the Partners. comes Energy of line from McLean next Blake

Unknown Analyst

One more M&A. on

a lot here. You about talked it

that X and great might a have and terms Last market international what set that? how in Are the there opportunity insights. in of versus differ differences event. market And how more guys bit of about sentiment what anything the internationally? America share they like looks would differ like M&A You deals, or North you kind

R. Prejean

clear, you're what's Hemisphere? Eastern between market, be to versus So M&A the difference wondering Hemisphere the Western

Unknown Analyst

Yes, sir.

R. Prejean

legality opportunities customer the bit transparent. little spread have are less by There Eastern kind I All Hemisphere North numerous markets. a business you bases. multiple that America, ones type mean in right. in operates Great. whereas how and are mean business a of both in they're more countries, of functions I of and the seamless What Yes. is with the across

for So making -- in not, companies numerous business ability that the know be there get the some nuances owned, and and we that scale. how But fit the and we more those of operating about opportunistic some with sticking them the In those most acquisitions along to of are the multiple out profile go have deals for want kind bolt-on accretive of of a markets. few all based with and Eastern us. their that in may where I countries market, we contracts of us there accomplish. definitely in to of the of type Hemisphere them of lane but more what U.S. because foreign challenges all ton economies complexity of U.S. that good with they're think all It's range valuations power the is. are

clients. just cost have to where acquisitions, I more particularly us value We've We more in the lower America, benefit deliver And that's mean, our for our and I makes to got North think here. competitive. competitive. comes more doing be

answer question? that does your So

Unknown Analyst

for Thank Absolutely. you that color.

reporting revenue over you've be? Anything might guys piece, Any share? got the that international forward. the what different look you years, terms growth the like next rate sort might mix or share you that targets might might On in aspirations that what few of going like of

R. Prejean

it was in So expect grow more future. -- grow, it will one as segment already is in and stated XX% in It income 'XX, of such reasons the reporting so X% our 'XX. adjusted think market our the to that of be we expect significantly we've I to that to we we

year-to-year. that's measure able that be So -- to we'll

that's So the we one of reasons approach. that took

Operator

turn the to I'll for closing floor our This comments. session. concludes back question-and-answer management

R. Prejean

Drilling Tools to International. measuring forward listening and for progress. in in interest All future attending reporting great a We and your Have right. everybody, day. our look quarters Thanks, and

Operator

call. conference today's concludes This you. Thank

You your lines may time. Thank this disconnect you your at participation. for

Drilling Tools International (DTI) 14 Nov 242024 Q3 Earnings call transcript