Drilling Tools International Corporation

Greetings, and welcome to the Drilling Tools International 2025 Year-End and Fourth Quarter Financial Results 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 during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard, Investor Relations. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for Drilling Tools International's 2025 year-end and fourth 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 year-end, fourth quarter results, and 2026 outlook before opening the call for your questions. There'll be a replay of today's call that'll be available via webcast on the company's website. That's drillingtools.com. And there'll also be a telephonic recorded replay available until March 13th. Please note that any information reported on this call speaks only as of today, March 6th, 2026, And therefore, you're advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this 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 that differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies. The 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 informational purposes and they should not be considered in isolation from the most 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 our earnings release, and our filings with the SEC. And now with that housekeeping 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 open with some comments on our full year results, then hand the call over to David to review fourth quarter financials and our 2026 outlook. After that, I will wrap it up with a few additional thoughts before we open up for questions. We are pleased with our strong performance in the fourth quarter, which enabled us to finish the year on a positive note. These results demonstrate our ability to deliver consistent returns in the face of continued market softness. Despite global rig count declining 7% year-over-year, we were able to produce resilient results and generate significant free cash flow. In fact, DTI's annual adjusted free cash flow has grown each year since going public in 2023. This is an achievement we take great pride in and underscores our ability to operate efficiently, capitalize on opportunities in the market, and navigate the evolving energy landscape. Our 2025 results came in at or above the high end of our guidance ranges. We generated total rental revenues of $129.6 million and total product sales revenues of $30.1 million or $159.6 million on a consolidated basis. Adjusted net income for 2025 was $3.4 million, and adjusted diluted EPS for 2025 was $0.10 per share. We generated 2025 adjusted EBITDA of $39.3 million and adjusted free cash flow of $19.2 million. We completed our fourth acquisition in January 2025 since going public and we were able to meaningfully reduce our net debt compared to the same period a year ago. This reflects our capital discipline and intentional focus on paying down debt. As the market softened throughout the year, we utilized our flexible CapEx model and pivoted to harvesting cash. which we then used to pay down over $11 million of debt in the back half of 2025. We also returned a portion of our free cash flow to shareholders through our share buyback program. These actions reinforce our commitment to enhancing shareholder value and maintain our solid financial position. Geographically, our Eastern Hemisphere operations experienced continued growth in 2025, and this expansion was a large contributor to the resilience of our results. Year over year, our Eastern Hemisphere revenue grew by 78% and contributed approximately 14% of our total revenue. The Eastern Hemisphere segment has continued to perform well, reflecting significant demand for our tools, along with consistent execution and DTI's growing market presence. Western Hemisphere operations were impacted by softer North American drilling and completions activity in 2025 but managed to only see a low single-digit revenue decline when compared to 2024. As the situation evolves in the Middle East, we are focused on supporting our employees and clients. As of today, most all rigs are operating. Assuming this remains the same, we anticipate a positive baseline of activity with upside driven by oil capacity expansion and strategic gas development. This momentum sends an encouraging signal as we look to further expand our eastern hemisphere operations. Our strong alignment with local operators positions us well for continued expansion, and again, assuming there are no major rig activity or infrastructure disruptions, we expect our customers to scale up their activities heading into 2026, and we expect growing market adoption of our tools to make us the service company of choice in the region. As evidence of the traction that our tools have gained in the Eastern Hemisphere to date, Our wellbore optimization product line offering continues to benefit from the significant increase in utilization of drill and ream tools and our clear path stabilizer technology throughout the eastern hemisphere. We expect this constructive trend to continue as rig activity in Saudi Arabia stabilizes and selected programs are reactivated, creating incremental demand tailwinds for our eastern hemisphere segment. Over the past 24 months, we have completed several strategic acquisitions. And even as market conditions have tempered some of the near-term upside, we have remained focused on discipline integration and realization of targeted synergies. This has allowed us to strengthen DTI's foundation and position the company for meaningful financial improvement as activity levels rebound. I'm encouraged by our team's ability to make the best out of a challenging environment. And I firmly believe that this will set us up for future success. David will now take you through our results in greater detail and introduce our 2026 Outlook. David?