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    DTI
    Earnings call· Jun 2026(Q2 FY26)

    Drilling Tools International Q2 FY26 earnings call DTI

    Aug 7, 2026 Source

    Executive summary

    Drilling Tools International Q2 FY26 — Strong Cash Flow and Reaffirmed Full-Year Guidance

    Drilling Tools International delivered resilient Q2 FY26 results, generating strong adjusted free cash flow despite a challenging global rig count environment. The company reaffirmed its full-year guidance, anticipating a robust second half driven by recovering North American activity and growing momentum in the Eastern Hemisphere, particularly with its ClearPath stabilizer technology. Strategic investments in this technology are expected to support durable revenue growth into 2027.

    Highlights

    5

    • Generated $38.1 million of revenue.

    • Achieved $8.4 million of adjusted EBITDA.

    • Delivered strong adjusted free cash flow of $4.1 million.

    • Maintained tool rental gross margin above 70%.

    • Reaffirmed full-year 2026 guidance ranges for revenue, adjusted EBITDA, and adjusted free cash flow.

    Concerns

    5

    • Global rig count declined nearly 4% sequentially and remained down year over year.

    • Middle East rig count fell almost 7% in the quarter, impacting activity levels.

    • Reported a net loss attributable to stockholders of $1.8 million, or $0.05 per share.

    • Adjusted net loss was $575,000, or an adjusted loss per share of $0.02.

    • Net debt increased modestly to $51.7 million, primarily reflecting the Norway investment.

    Guidance & targets

    3
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $155 million to $170 million
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $35 million to $45 million
    high materiality
    High
    Full-year 2026 Adjusted Free Cash Flow
    up to $22 million
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Eastern Hemisphere
    Remained an important contributor. Activity and utilization improving, Middle East conflict stabilizing. Expected to play an increasingly meaningful role in coming quarters.
    Contribution to total revenue: approximately 18%
    		————
    Western Hemisphere
    Continues to represent the bulk of our business. Encouraged by recent rig additions and opportunities after prolonged activity decline.
    Contribution to total business: bulk
    		————

    Operational metrics

    17
    Total Consolidated Revenue
    $38.1 million
    Q2 FY26

    Generated total consolidated revenue of $38.1 million during the second quarter.

    Tool Rental Revenue
    $29.6 million
    Q2 FY26

    tool rental revenue of $29.6 million

    Product Sales Revenue
    $8.5 million
    Q2 FY26

    product sales revenue totaling $8.5 million

    Net Loss Attributable to Stockholders
    $1.8 million
    Q2 FY26

    Net loss attributable to stockholders for the second quarter was approximately $1.8 million

    EPS
    $0.05
    Q2 FY26

    or a loss of 5 cents per share.

    Adjusted Net Loss
    $575,000
    Q2 FY26

    Adjusted net loss was $575,000

    Adjusted EPS
    $0.02
    Q2 FY26

    or an adjusted loss per share of two cents.

    Adjusted EBITDA
    $8.4 million
    Q2 FY26

    Adjusted EBITDA was $8.4 million

    Tool Rental Gross Margin
    above 70%
    Q2 FY26

    our tool rental gross margin remained above 70%

    Capital Expenditures
    $4.2 millioncompared to $7.7 million in the first quarter of this year
    Q2 FY26

    Capital expenditures in the second quarter were approximately $4.2 million compared to $7.7 million in the first quarter of this year.

    Maintenance CapEx
    12%
    Q2 FY26

    Maintenance CapEx for the second quarter was approximately 12% of total revenue.

    Cash and Cash Equivalents
    $2.5 million
    as of June 30, 2026

    as of June 30, 2026, we had $2.5 million of cash and cash equivalents

    Net Debt
    $51.7 million
    as of June 30, 2026

    net debt of $51.7 million.

    North American Rig Count
    541 rigsdown roughly 3% from the same period last year
    Q2 FY26 average

    The U.S. land rig count averaged approximately 541 rigs in the second quarter, down roughly 3% from the same period last year.

    North American Rig Count
    777 rigsmore than 70 rigs or 10% above the second quarter average
    July 2026

    The North American rig count built steadily through the quarter and stands at 777 rigs in July, more than 70 rigs or 10% above the second quarter average.

    Canadian Rig Count
    193 rigshighest since February
    July 2026

    July activation of 193 rigs, the highest since February, signaled that softness has largely abated.

    Outstanding Shares in Public Float
    approximately 90%
    Q2 FY26

    Following the HHEP distribution, approximately 90% of outstanding shares are held in the public float.

    Industry KPIs

    3
    MetricValueDetails
    FCF CAPEX leverageAdjusted FCF: $4.1 million; CapEx: $4.2 million; Net Debt: $51.7 millionUSD
    M a integration progress—
    Orders bookings by segment—

    Capital programs

    1
    ClearPath Technology Investmentunderway
    Period spend: $4.2 million
    Spent to date: $4.2 million
    Start: Q2 FY26

    Benefit: support Norwegian growth opportunities, tied to long-term rental agreements

    Capital expenditures in the second quarter were approximately $4.2 million, largely for strategic investments in ClearPath technology to support Norwegian and other offshore opportunities. This investment is expected to deliver strong returns as work ramps up in H2 2026 and into 2027.

    Risks & headwinds

    5
    Global rig count declineQ2 FY26

    nearly 4% sequentially, down year over year

    Mitigation: strength of our business model, disciplined execution, and geographic diversification

    Middle East regional conflict and operational disruptionQ2 FY26

    rig count fell almost 7% in the quarter, intermittent starts and stops and rig moves

    Mitigation: lean operations and specialized product focus have kept demand for our tools steady, limited headcount and little to no additional resources needed

    Softer North American land activityQ2 FY26

    U.S. land rig count averaged approximately 541 rigs in the second quarter, down roughly 3% from the same period last year; lengthy spring breakup in Canada

    Mitigation: activity began to improve and commercial terms firmed up toward the end of the second quarter, momentum has carried into the third quarter

    Pricing pressure in certain areas of rental businessQ2 FY26

    Even with that compression, our tool rental gross margin remained above 70%

    Mitigation: pressure has stabilized, winning business on stronger commercial terms

    Macro uncertainty, geopolitical turbulence, volatile commodity prices and customer prudenceH1 FY26

    muted Q2 results

    Mitigation: seeing encouraging momentum across several regions, winning new business, improving commercial terms, gaining market share

    What to watch in Q3 FY26

    5

    North American Rig Count

    next quarter
    Current777 rigs in July
    TargetContinued upward trend and improved utilization

    Why it matters

    Indicates recovery in the largest part of DTI's business and supports stronger H2 results.

    The North American rig count built steadily through the quarter and stands at 777 rigs in July, more than 70 rigs or 10% above the second quarter average. which is encouraging as we contemplate the remainder of 2026.

    Q&A highlights

    5

    How is the maintained full-year guidance broken down between North America and international, and what is the outlook for US drilling activity given the uncertainty?

    Management relies on Canada's rebound and improving US activity, noting higher commodity prices should drive more activity. Internationally, new technology (ClearPath) is gaining traction in high-value offshore markets, and momentum is building in the Middle East despite volatility, though Saudi operations faced disruptions.

    “Well, we're kind of relying on, you know, Canada rebounding, which has been really helpful. And it's such a bright spot for a strong, you know, component of our business. And the U.S. is rebounding nicely, you know, with a few little ripples in the water every now and then.”

    asked by Steve Ferrazzani · answered by Wayne Prejean

    2 min read5 chapters

    Detailed Narrative

    01

    Global Rig Count Dynamics

    Despite a nearly 4% sequential and year-over-year decline in global rig count, including a 7% drop in the Middle East, DTI maintained resilient performance. The North American rig count, particularly in the US, showed recovery late in Q2 and into July, with bottom-hole assembly rigs outpacing the broader increase. This momentum is expected to support stronger results later in the year.

    02

    Eastern Hemisphere Momentum

    Operations in the Eastern Hemisphere are gaining momentum, with improving utilization and a strengthening industry outlook. The ClearPath stabilizer technology is gaining traction in offshore markets, leading to anticipated new awards and a material step-up in European contribution in H2 2026, extending well into 2027. The company is investing ahead of this work by redeploying capital from more mature markets.

    03

    Commercial Terms and Market Share

    DTI is winning business on stronger commercial terms and gaining market share due to its reliability, tool quality, and specialized equipment that meets the demands of high-performance wells. After several quarters of pricing compression, management believes this pressure has stabilized. This momentum, arriving late in Q2, positions the company well for the remainder of 2026.

    04

    Strategic Investments

    The company is making strategic investments in its ClearPath technology to support Norwegian and other offshore opportunities. These investments will lead to elevated CapEx in the second half of the year, which will not taper as significantly as usual. These capital outlays are tied to long-term rental agreements and are expected to deliver strong returns, supporting durable revenue growth in H2 2026 and beyond.

    05

    HHEP Share Distribution

    DTI's former sponsor, HHEP, completed its share distribution to its limited partners during the second quarter. This action resulted in approximately 90% of outstanding shares being held in the public float, positioning DTI as a fully independent public company with a broad ownership profile and significantly improved trading liquidity.

    AI-generated summary of the company’s earnings call. Not investment advice.