Drilling Tools International Corp
For the period ended Mar 31, 2026. Filed May 8, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 8, 2026
DTI$1.43+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001193125-25-271536
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001193125-26-214074
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 81 previous paragraphs and 73 current paragraphs.
44 unchanged; 18 reworded; 11 added; 17 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Oil and Natural Gas Prices
Current report
The following table summarized average oil and natural gas prices in North America over the indicated periods as well as International and Domestic industry activity levels as reflected by the average number of active onshore drilling rigs during the same periods.
Current report
(1) U.S. Energy Information Administration (“EIA”) Cushing, OK WTI (“West Texas Intermediate”) monthly average spot price per barrel of crude oil.
Current report
(2) EIA Henry Hub Natural Gas monthly average spot price per million British Thermal Unit (“MMBtu”).
Current report
(3) Baker Hughes, includes land and offshore activity and does not include miscellaneous rigs
Current report
During the three months ended March 31, 2026, the oil and gas market continued to reflect a dynamic interplay of geopolitical tensions, shifting demand patterns, and broader macroeconomic factors. U.S. oil production remained near record levels, supported by sustained activity in the Permian Basin and offshore developments. However, elevated supply, combined with moderating global demand growth, contributed to a continued imbalance in global oil markets and exerted downward pressure on prices. Crude oil prices, including WTI, remained volatile during the quarter and generally trended below prior-year levels. Despite this near-term volatility, our customers continue to prioritize medium- and long-term commodity price expectations when making investment decisions, given the extended lead times associated with offshore projects.
Current report
During the three months ended March 31, 2026, U.S. natural gas prices continued to strengthen, building on the recovery observed in 2025 following the record lows of 2024. Market fundamentals remained supportive, with demand growth continuing to outpace increases in U.S. production, contributing to tighter inventory levels. As a result, natural gas prices remained elevated during the quarter.
Current report
Eastern Hemisphere revenue was $6.7 million for the three months ended March 31, 2026, an increase of $1.7 million, or 33%, compared to the three months ended March 31, 2025. The increase in revenues was driven by increases in our product sales in the Eastern Hemisphere as well as increased rental activity in geographies into which the Company has expanded. Eastern Hemisphere segment loss was $0.1 million for the three months ended March 31, 2026, an increase of $0.1 million, or 41%, compared to the three months ended March 31, 2025. This increase was in line with the increase seen in revenue.
Current report
Interest expense, net was $1.0 million for the three months ended March 31, 2026, a decrease of $0.3 million, or 23%, compared to the three months ended March 31, 2025. The decrease was primarily a result of reduction in the Company's net debt balance year over year.
Current report
Other operating and non-operating expense, net was $0.8 million for the three months ended March 31, 2026, a decrease of $1.2 million, or 60%, compared to the three months ended March 31, 2025. The decrease was primarily a result of the restructuring costs incurred during the three months ended March 31, 2025 as a result of change in segments and reorganization.
Current report
We are not aware of any known trends, demands, commitments, events, or uncertainties that have resulted in or are reasonably likely to result in a material change in our liquidity. Our primary sources of liquidity continue to be cash flows from operations, together with availability under our credit facilities. We believe these sources will be sufficient to meet our working capital requirements, capital expenditures, and other liquidity needs for at least the next twelve months. However, our liquidity may be impacted by a variety of factors, including changes in market conditions, commodity prices, customer demand, capital allocation priorities, and other macroeconomic factors, the extent and timing of which remain uncertain.
Removed paragraphs (17)
Previous report
Industry Update
Previous report
In the nine months ended September 30, 2025, the oil and gas market witnessed a dynamic interplay of geopolitical tensions, shifting demand dynamics, and evolving geopolitical and economic factors. U.S. oil production reached record highs, averaging 13.5 million barrels per day, driven by the Permian Basin and offshore developments. However, this surge in supply coincided with an increasing surplus in global oil supply over demand, leading to downward pressure on prices. Crude oil prices experienced declines, specially WTI, whose quarterly average decreased from $76.24 per barrel to $65.74 per barrel from the third quarter of 2024 to the third quarter of 2025. Despite the high volatility in spot oil prices described above, our customers tend to be more focused on medium-term and long term commodity prices when making investment decisions due to the longer lead times for offshore projects.
Previous report
In the nine months ended September 30, 2025, U.S. natural gas prices experienced a notable rebound following the record lows of 2024. The Henry Hub spot price averaged approximately $3.03 per million British thermal units (MMBtu) during the third quarter, or a 43% increase compared to the third quarter of 2024. An increase in demand is expected to outpace any expected growth in U.S. production, leading to a tightening of inventories and supporting higher prices through the remainder of 2025
Previous report
Eastern Hemisphere revenue was $6.2 million for the three months ended September 30, 2025, an increase of $1.8 million, or 41% compared to the three months ended September 30, 2024. The increase in revenues was driven by the recent acquisitions of tool rental businesses located within the Eastern Hemisphere. Eastern Hemisphere segment income was $0.2 million, a decrease of $0.5 million, or 73%, compared to three months ended September 30, 2024. The decrease was driven by increased headcount as a result of the acquisitions and an activity decline seen in the Middle Eastern market.
Previous report
Interest expense, net was $1.3 million for the three months ended September 30, 2025, an increase of $0.3 million, or 29%, compared to the three months ended September 30, 2025 and 2024. The increase was primarily a result of interest on the term loan, entered into in March 2024, interest on amounts drawn on the credit facility, and interest on the promissory note, entered into in September 2024.
Previous report
Other operating and non-operating expense, net was $0.6 million for the three months ended September 30, 2025, a decrease of $1.9 million, or 76%, compared to the three months ended September 30, 2025 and 2024. The decrease was primarily a result of the transaction fees incurred during the third quarter of 2024.
Previous report
Comparison of the Nine Months Ended September 30, 2025 and 2024
Previous report
Western Hemisphere
Previous report
Western Hemisphere revenue was $113.7 million for the nine months ended September 30, 2025, an increase of $1.1 million, or 1%, compared to the nine months ended September 30, 2024. The increase in revenues was driven by the addition of our Diamond Products Division ("DPD") in August of 2024. Western Hemisphere segment income was $37.4 million, a decrease of $1.2 million, or 3%, compared to nine months ended September 30, 2024. The decrease was driven by increased headcount as a result of the acquisitions and other personnel related expenses.
Previous report
Eastern Hemisphere
Previous report
Eastern Hemisphere revenue was $17.4 million for the nine months ended September 30, 2025, an increase of $7.5 million, or 76% compared to the nine months ended September 30, 2024. The increase in revenues was driven by the recent acquisitions of tool rental businesses located within the Eastern Hemisphere. Eastern Hemisphere segment loss was $0.0 million, a decrease of $2.0 million, or 98%, compared to nine months ended September 30, 2024. The decrease was driven by increased headcount as a result of the acquisitions and an activity decline seen in the Middle Eastern market.
Previous report
Corporate and other expenses
Previous report
Corporate and other expenses was $10.6 million for the nine months ended September 30, 2025, a decrease of $1.1 million, or 10%, compared to the nine months ended September 30, 2024. The decrease was primarily driven by the reallocation of certain corporate expenses as a result of the recent segment reorganization in January of 2025.
Previous report
Depreciation and amortization expenses
Previous report
Interest Expense, net
Previous report
Interest expense, net was $3.9 million for the nine months ended September 30, 2025, an increase of $2.0 million, or 96%, compared to the nine months ended September 30, 2024. The increase was primarily a result of interest on the term loan, entered into in March 2024, interest on amounts drawn on the credit facility, and interest on the promissory note, entered into in September 2024.
Previous report
Other operating and non-operating expense, net was $4.4 million for the nine months ended September 30, 2025, a decrease of $0.8 million, or 15%, compared to the nine months ended September 30, 2024. The decrease was primarily a result of a decrease in transaction fees, offset by increases in restructuring charges and software implementation fees.
Reworded paragraphs (18)
Previous wording
The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of September 30, 2025, and for the three and nine months ended September 30, 2025 and 2024, included elsewhere herein. For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated. Capitalized terms used in this section, but not otherwise defined, have the meanings ascribed to them in the Report.
Current wording
The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of March 31, 2026, and for the three months ended March 31, 2026 and 2025, included elsewhere herein. For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated. Capitalized terms used in this section, but not otherwise defined, have the meanings ascribed to them in the Report.
Previous wording
Our revenues are derived from two sources: tool rental and product sales. Tool rental revenues are derived from the rental of tools used in bottom hole assemblies (“BHA”), various wellbore optimization tools, and tubular goods for drilling, workover, and completion operations. Additionally, tool rental revenue consists of the repair and inspection of such tools. Product sale revenues are derived from the sale of target depth technologies, the manufacturing and repair of tools for external customers, and tool recovery revenue. During the three months ended September 30, 2025 and 2024, we derived 82% and 70% of total revenues from tool rentals and 18% and 30% from product sales, respectively. During the nine months ended September 30, 2025 and 2024, we derived 82% and 75% from tool rentals and 18% and 25% from product sales, respectively.
Current wording
Our revenues are derived from two sources: tool rental and product sales. Tool rental revenues are derived from the rental of tools used in bottom hole assemblies (“BHA”), various wellbore optimization tools, and tubular goods for drilling, workover, and completion operations. Additionally, tool rental revenue consists of the repair and inspection of such tools. Product sale revenues are derived from the sale of target depth technologies, the manufacturing and repair of tools for external customers, and tool recovery revenue. During the three months ended March 31, 2026 and 2025, we derived 76% and 81% of total revenues from tool rentals and 24% and 19% from product sales, respectively.
Previous wording
Notwithstanding the significant commodity price volatility over the past several years, we have seen decreases in both the Western and Eastern Hemisphere. During the three and nine months ended September 30, 2025, the weekly average Western Hemisphere rig count, as reported by Baker Hughes was 851 and 871 rigs, respectively, compared to 947 and 946 rigs for the three and nine months ended September 30, 2024. Additionally, during the three and nine months ended September 30, 2025, the weekly average Eastern Hemisphere rig count, as reported by Baker Hughes was 887 and 900 rigs, respectively, compared to 950 and 969 rigs for the three and nine months ended September 30, 2024. However, notwithstanding the impact of longer laterals, improved rig efficiencies have partially offset the impact of this reduction.
Current wording
Despite significant commodity price volatility over the past several years, we have seen decreases in both the Western and Eastern Hemisphere. However, notwithstanding the impact of longer laterals, improved rig efficiencies have partially offset the impact of this reduction. As a result, while overall activity has moderated, productivity per rig has increased, helping to cushion the effect of reduced drilling activity on overall output.
Previous wording
We are experiencing the impacts of global inflation, both in increased personnel costs and the prices of goods and services required to operate our rigs and execute capital projects. While we are currently unable to estimate the ultimate impact of rising prices, we do expect that our costs will continue to rise in the near term and will impact our profitability.
Current wording
We are experiencing the impacts of global inflation, both in increased personnel costs and the prices of goods and services required to operate drilling rigs and execute capital projects. While we are currently unable to estimate the ultimate impact of rising prices, we do expect that our costs will continue to rise in the near term and will impact our profitability.
Previous wording
Western Hemisphere revenue was $35.0 million for the three months ended September 30, 2025, a decrease of $3.8 million, or 10%, compared to the three months ended September 30, 2024. The decrease in revenues was driven by a decrease in tool rental revenue as a result of lower customer activity levels during the three months ended September 30, 2025. Western Hemisphere segment income was $11.7 million, a decrease of $1.8 million, or 14%, compared to three months ended September 30, 2024. The decrease was in line with the decrease in revenue and driven by lower customer activity levels during the three months ended September 30, 2025.
Current wording
Western Hemisphere revenue was $33.4 million for the three months ended March 31, 2026, a decrease of $7.8 million, or 19%, compared to the three months ended March 31, 2025. The decrease in revenues was driven by a decrease in tool rental revenue as a result of lower customer activity levels and pricing pressures during the three months ended March 31, 2026. Western Hemisphere segment income was $10.1 million for the three months ended March 31, 2026, a decrease of $3.5 million, or 26%, compared to three months ended March 31, 2025. The decrease was in line with the decrease in revenue and driven by lower customer activity levels and pricing pressures during the three months ended March 31, 2026.
Previous wording
Depreciation and amortization expenses was $6.8 million for the three months ended September 30, 2025, an increase of $0.6 million, or 10%, compared to the three months ended September 30, 2025 and 2024. The increase corresponds with the increasing property, plant, and equipment and intangible asset balances as a result of acquisitions and capital expenditures.
Current wording
Depreciation and amortization expense was $6.9 million for the three months ended March 31, 2026, an increase of $0.2 million, or 3%, compared to the three months ended March 31, 2025. The increase corresponds with the increasing property, plant, and equipment and intangible asset balances as a result of acquisitions and capital expenditures.
Previous wording
We use the non-GAAP financial measure Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other operating and non-operating expense, net, net; income tax benefit (expense); depreciation and amortization; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
Current wording
We use the non-GAAP financial measure Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other operating and non-operating expense, net; income tax benefit (expense); depreciation and amortization; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
Previous wording
The following tables present a reconciliation of Adjusted EBITDA to net income (loss) for the three and nine months ended September 30, 2025 and 2024 (non-recurring transaction expenses recorded to other (income) expense are presented separately within Adjusted EBITDA):
Current wording
The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for the (non-recurring transaction expenses recorded to other (income) expense are presented separately within Adjusted EBITDA):
Previous wording
At September 30, 2025, we had $4.4 million of cash and cash equivalents. Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under the Credit Facility Agreement. We may use additional cash generated to execute strategic acquisitions or for general corporate purposes. We believe that our existing cash on hand, cash generated from operations and available borrowings under the Credit Facility Agreement will be sufficient for at least the next 12 months to meet working capital requirements and anticipated capital expenditures.
Current wording
At March 31, 2026, we had $2.8 million of cash and cash equivalents. Our primary sources of liquidity and capital resources are cash on hand, cash flows generated by operating activities and, if necessary, borrowings under the Credit Facility Agreement. We may use additional cash generated to execute strategic acquisitions or for general corporate purposes. We believe that our existing cash on hand, cash generated from operations and available borrowings under the Credit Facility Agreement will be sufficient for the next 12 months to meet working capital requirements and anticipated capital expenditures as well as any need beyond the next 12 months.
Previous wording
Our material contractual obligations arise from leases of facilities and vehicles under noncancelable operating leases agreements. See Note 15 -Commitments and Contingencies, of the notes to the Interim Financial Statements.
Current wording
Our material contractual obligations arise from leases of facilities and vehicles under noncancelable operating lease agreements. See Note 15 -Commitments and Contingencies, of the notes to the Interim Financial Statements.
Previous wording
Cash Flows Used In Financing Activities
Current wording
Cash Flows Used In Operating Activities
Previous wording
Net cash provided by operating activities for the nine months ended September 30, 2025 was $14.6 million, the driver being a net loss of $4.9 million and a decrease in net working capital of $1.3 million offset by non-cash adjustments of $21.4 million. We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in the section of this Report entitled “Risk Factors.”
Current wording
Net cash used in operating activities for the three months ended March 31, 2026 was $3.2 million, the driver being a net loss of $2.0 million and a decrease in net working capital of $6.1 million offset by non-cash adjustments of $4.9 million. We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in the section of this Report entitled “Risk Factors.”
Previous wording
Net cash provided by operating activities for the nine months ended September 30, 2024 was $9.7 million, the driver being net income of $4.4 million, including non-cash charges of $13.9 million, offset by a decrease in net working capital of $8.6 million.
Current wording
Net cash provided by operating activities for the three months ended March 31, 2025 was $2.4 million, the driver being a net loss of $1.7 million, including non-cash charges of $7.2 million, offset by a decrease in net working capital of $3.1 million.
Previous wording
Net cash used in investing activities for the nine months ended September 30, 2024 was $46.1 million, resulting from purchases of property, plant, and equipment of $19.7 million and the acquisition of DCT and SDPI for $38.7 million were partially offset by proceeds from rental tool recovery sales of $10.9 million.
Current wording
Net cash used in investing activities for the three months ended March 31, 2026 was $3.0 million resulting from purchases of property, plant, and equipment of $7.7 million, purchases of intangible assets of $0.4 million, partially offset by proceeds from rental tool recovery sales of $5.1 million.
Previous wording
Net cash used in investing activities for the nine months ended September 30, 2025 was $12.7 million resulting from purchases of property, plant, and equipment of $16.1 million, purchases of intangible assets of $1.4 million, and the acquisition of Titan for $5.6 million, partially offset by proceeds from rental tool recovery sales of $10.4 million.
Current wording
Net cash used in investing activities for the three months ended March 31, 2025 was $7.3 million, resulting from purchases of property, plant, and equipment of $5.0 million, purchases of intangible assets of $0.7 million, and the acquisition of Titan Tools for $5.6 million were partially offset by proceeds from rental tool recovery sales of $4.0 million.
Previous wording
Cash Flows Provided by Operating Activities
Current wording
Cash Flows Provided By Financing Activities
Previous wording
Net cash provided by financing activities for the nine months ended September 30, 2024 was $43.4 million, resulting from net debt increases of $44.1 million offset by the payment of debt issuance costs of $0.7 million.
Current wording
Net cash provided by financing activities for the three months ended March 31, 2026 was $5.3 million, resulting from net debt increases of $6.0 million, offset by purchases of treasury stock of $0.7 million.
Previous wording
Net cash used in financing activities for the nine months ended September 30, 2025 was $3.7 million, resulting from net debt decreases of $2.6 million and purchases of treasury stock of $1.2 million.
Current wording
Net cash provided by financing activities for the three months ended March 31, 2025 was $1.4 million, resulting from net debt increases of $1.4 million.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Depreciation and amortization expenses was $20.4 million for the nine months ended September 30, 2025, an increase of $3.2 million, or 18%, compared to the nine months ended September 30, 2024. The increase corresponds with the increasing property, plant, and equipment and intangible asset balances as a result of acquisitions and capital expenditures.
Previous report — wording carried elsewhere
Other operating and non-operating expense, net