Drilling Tools International Corporation

Greetings and welcome to the Drilling Tools International third quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ken Denard. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for Drilling Tools International's 2025 third quarter conference call and webcast. With me today are Wayne Prejean, Chief Executive Officer, and David Johnson, Chief Financial Officer. Following my remarks, management will provide a review of third quarter results and 2025 outlook before opening the call for your questions. There will be a replay of today's call that will be available by webcast on the company's website at drillingtools.com. There will also be a telephonic replay, a recorded replay, which will be available until November 14th. Please note that information reported on this call speaks only as of today, November 7th, 2025. And therefore, you're advised that time-sensitive information may no longer be accurate as of the time of any replay listing or transcript reading. Also, comments on the call will contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of DTI's management. However, various risks and uncertainties and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8K to understand those risks, uncertainties, and contingencies. Comments today will also include certain non-GAAP financial measures, including but not limited to adjusted EBITDA and adjusted free cash flow. The company provides these non-GAAP results for information purposes, and they should not be considered in isolation from other directly comparable GAAP measures. A discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures, and reconciliations to the most directly comparable GAAP measures can be found in the earnings release and our filings on the SEC. And now with that behind me, I'd like to turn the call over to Wayne Prejean, DTI's Chief Executive Officer. Wayne.

Thanks, Ken, and good morning, everyone. I will provide some opening remarks before handing the call over to David to review the financials and our reaffirmed 2025 outlook. I'll then come back and provide a few additional thoughts before we open it up for questions. We are pleased to report that our 2025 third quarter results came in better than we anticipated. Proactive communications with customers and our ability to flex pricing options in response to commodity price swings have successfully stimulated higher activity levels during the quarter, offsetting the impact of any previously negotiated pricing concessions. We also demonstrated strong financial discipline during the quarter by simultaneously reducing debt, building cash reserves, and returning capital to shareholders through buybacks. Specifically, we paid down $5.6 million in debt, increased our cash position by $3.2 million, and bought back an additional $550,000 of common shares. DTI has benefited from solid progress on our strategic initiatives, particularly the integration of our recent acquisitions in the Eastern Hemisphere. During the third quarter, we saw a significant increase in utilization of the DNR tool fleet in the Middle East and throughout the Eastern Hemisphere. This increase in DNR tools deployed contributed to our Eastern Hemisphere growth and Middle East expansion during the quarter. Year over year, our Eastern Hemisphere operations grew revenue by 41% and contributed approximately 15% of our total revenue in the third quarter. The eastern hemisphere is performing in line with our forecast plan, demonstrating our disciplined approach to capital allocation and our ability to successfully integrate new assets into our operations. Looking forward, commodity prices continue to flex as geopolitical uncertainty has enhanced volatility in oil and gas markets. However, average rig counts and activity levels appear to have stabilized during the quarter, inasmuch our teams continue to skillfully manage their current fluctuations in commodity prices and rig counts delivering resilient financial results while navigating this evolving energy landscape. Again, while the rig count appears to be stabilizing, we still expect uncertainty to continue causing disruptions through both pricing pressure and utilization. To combat these disruptions, We implemented a cost cutting program in the first half of 2025 to reduce expenses by an annual $6 million in order to align our spending with the activity levels of our customers. However, we have experienced an increase in customer activity that has directly offset price discounts, particularly in our DTR product line, as well as new contract wins with customers. Therefore, We are pleased to report that we no longer anticipate needing the full $6 million of cost cuts to maintain adjusted free cash flow and achieve other outlook ranges. Our pricing strategies that we have implemented are yielding positive results on activity levels, and we currently believe $4 million of cost cuts will prove sufficient for 2025. Please note, however, that we still have contingency plans to adjust the organization while maintaining operational flexibility to quickly respond to any market events in the future. David will now take you through some third quarter and nine-month metrics, as well as our 2020 Vibe Outlook. David?