Drilling Tools International第二季虧損收窄至179萬美元 收入略跌3.4%

10-Q
 
 
 
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 

  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(Mark One)

 
 
 
 
 

 
 ☒

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the quarterly period ended June 30, 2026
OR

 
 
 
 
 

 
 ☐

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the transition period from ____ to ____
Commission File Number: 001-41103
 
DRILLING TOOLS INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
 
 

 
 
 
 
 
 

 
 Delaware

 

 87-2488708

 

 
 (State or other jurisdiction of
incorporation or organization)

 (I.R.S. Employer
Identification No.)

 

 
 10370 Richmond Ave.
#1000
Houston, Texas

 77042

 

 
 (Address of principal executive offices)

 (Zip Code)

 

 Registrant’s telephone number, including area code: (832) 742-8500
 
Securities registered pursuant to Section 12(b) of the Act: 
 

 
 
 
 
 
 
 
 

 
 Title of each class

  

 Trading
Symbol(s)

  

 Name of each exchange on which registered

 

 
 Common stock, par value $0.0001 per share

  

 DTI

  

 The Nasdaq Stock Market LLC

 

  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 

 
 
 
 
 
 
 
 
 
 

 
 Large accelerated filer

 

 ☐

 

 Accelerated filer

 

 ☐

 

 
  

  

  

  

 

 
 Non-accelerated filer

 

 ☒

 

 Smaller reporting company

 

 ☒

 

 
  

  

  

  

  

  

  

 

 
 Emerging growth company

  

 ☒

  

  

  

  

 

  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 4, 2026, the registrant had 35,282,224 shares of common stock, $0.0001 par value per share, outstanding.

 

 
  

 Table of Contents
 

 
 
 
 
 
 

 
 

 

 Page

 

 
  

 Cautionary Note Regarding Forward-Looking Statements

 1

 

 
  

 PART I. - FINANCIAL INFORMATION

 

 

 
 Item 1.

 Condensed Consolidated Financial Statements (Unaudited)

 3

 

 
 

 Condensed Consolidated Balance Sheets

 3

 

 
 

 Condensed Consolidated Statements of Comprehensive Income (Loss) 

 4

 

 
 

 Condensed Consolidated Statements of Changes in Shareholders' Equity

 5

 

 
 

 Condensed Consolidated Statements of Cash Flows

 7

 

 
 

 Notes to Condensed Consolidated Financial Statements (Unaudited)

 8

 

 
 Item 2.

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 29

 

 
 Item 3.

 Quantitative and Qualitative Disclosures About Market Risk

 37

 

 
 Item 4.

 Controls and Procedures

 38

 

 
  

 PART II. - OTHER INFORMATION

  

 

 
 Item 1.

 Legal Proceedings

 39

 

 
 Item 1A.

 Risk Factors

 39

 

 
 Item 2.

 Unregistered Sales of Equity Securities and Use of Proceeds

 39

 

 
 Item 3.

 Defaults Upon Senior Securities

 39

 

 
 Item 4.

 Mine Safety Disclosures

 39

 

 
 Item 5.

 Other Information

 39

 

 
 Item 6.

 Exhibits

 40

 

 
 Signatures

 41

 

  

  

 
  

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report on Form 10-Q (this “Report”) may constitute "forward-looking statements" for purposes of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding our and our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward‑looking. Forward-looking statements in this Report may include, for example, statements about:
 
•the demand for our products and services, which is influenced by the general level of activity in the oil and gas industry;

•our ability to retain our customers, particularly those that contribute to a large portion of our revenue;

•our ability to employ and retain a sufficient number of skilled and qualified workers, including our key personnel;

•the impact of our status as an emerging growth company and smaller reporting company;

•our ability to source tools at reasonable cost;

•our customers’ ability to obtain required permits or authorizations from applicable governmental agencies and other third parties;

•our ability to market our services in a competitive industry;

•our ability to execute, integrate and realize the benefits of acquisitions, and manage the resulting growth of our business;

•our ability to obtain new technology that may become prevalent in the oilfield services industry;

•potential liability for claims arising from damage or harm caused by the operation of our tools, or otherwise arising from the dangerous activities that are inherent in the oil and gas industry;

•the impact of a global pandemic;

•the impact of the ongoing Russia-Ukraine and Israel-Hamas conflicts on the global economy;

•application of oilfield anti-indemnity limitations enacted by certain states;

•our ability to obtain additional capital;

•the impact of restrictive covenants in the Second Amended and Restated Revolving Credit, Term Loan and Security and Guaranty Agreement among Drilling Tools International, Inc., certain of its subsidiaries, Drilling Tools International Corporation and PNC Bank, National Association, dated as of March 15, 2024 (the “Credit Facility Agreement”);

•the impact of indebtedness incurred to execute our long-term growth strategy;

•potential political, regulatory, economic and social disruptions in the countries in which we conduct business, including changes in tax laws or tax rates;

•our dependence on our information technology systems, in particular Customer Order Management Portal and Support System, for the efficient operation of our business;

•the impact of a change in relevant accounting principles, enforcement of existing or new regulations, and changes in policies, rules, regulations, and interpretations of accounting and financial reporting requirements;

•the impact of adverse and unusual weather conditions on our operations;

•our ability to comply with applicable laws, regulations and rules, including those related to the environment, greenhouse gases and climate change;

•our ability to protect our intellectual property rights or trade secrets;

•our ability to maintain an effective system of disclosure controls and internal control over financial reporting;

•the potential for volatility in the market price of the Common Stock;

  
1

 
  

 •the potential for issuance of additional shares of DTIC Common Stock or other equity securities;

•our ability to maintain the listing of the DTIC Common Stock on Nasdaq;

•the impact of industry or securities analysts changing their recommendation, or failing to cover, the DTIC Common Stock and

•other risks and uncertainties described in this Report, including those under the section entitled “Risk Factors.”

 
 

  
2

 
  

 PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 

  

 June 30,

  

  

 December 31,

  

 

 
 (In thousands, except share data)

  

 2026

  

  

 2025

  

 

 
  

  

  

  

  

  

  

 

 
 ASSETS

  

  

  

  

  

  

 

 
 Current assets

  

  

  

  

  

  

 

 
 Cash

  

 $

 2,520

  

  

 $

 3,648

  

 

 
 Accounts receivable, net

  

  

 43,494

  

  

  

 37,683

  

 

 
 Related party note receivable, current

  

  

 1,541

  

  

  

 1,541

  

 

 
 Inventories

  

  

 20,160

  

  

  

 18,149

  

 

 
 Prepaid expenses and other current assets

  

  

 6,073

  

  

  

 3,866

  

 

 
 Total current assets

  

  

 73,788

  

  

  

 64,887

  

 

 
 Property, plant and equipment, net

  

  

 71,815

  

  

  

 72,602

  

 

 
 Operating lease right-of-use asset

  

  

 24,458

  

  

  

 25,181

  

 

 
 Intangible assets, net

  

  

 38,143

  

  

  

 39,674

  

 

 
 Goodwill, net

  

  

 14,543

  

  

  

 14,616

  

 

 
 Deferred financing costs, net

  

  

 512

  

  

  

 468

  

 

 
 Related party note receivable, less current portion

  

  

 4,019

  

  

  

 3,836

  

 

 
 Deposits and other long-term assets

  

  

 1,313

  

  

  

 917

  

 

 
 Total assets

  

 $

 228,591

  

  

 $

 222,181

  

 

 
 LIABILITIES AND SHAREHOLDERS' EQUITY

  

  

  

  

  

  

 

 
 Current liabilities

  

  

  

  

  

  

 

 
 Accounts payable

  

 $

 14,544

  

  

 $

 9,785

  

 

 
 Accrued expenses and other current liabilities

  

  

 8,759

  

  

  

 10,711

  

 

 
 Current portion of operating lease liabilities

  

  

 4,639

  

  

  

 4,335

  

 

 
 Current maturities of long-term debt

  

  

 5,932

  

  

  

 5,989

  

 

 
 Total current liabilities

  

  

 33,874

  

  

  

 30,820

  

 

 
 Operating lease liabilities, less current portion

  

  

 20,552

  

  

  

 21,494

  

 

 
 Revolving line of credit

  

  

 39,330

  

  

  

 25,000

  

 

 
 Long-term debt, less current portion

  

  

 8,957

  

  

  

 14,827

  

 

 
 Deferred tax liabilities, net

  

  

 6,157

  

  

  

 7,167

  

 

 
 Total liabilities

  

  

 108,870

  

  

  

 99,308

  

 

 
 Commitments and contingencies (See Note 15)

  

  

  

  

  

  

 

 
 Shareholders' equity

  

  

  

  

  

  

 

 
 Common stock, $0.0001 par value, shares authorized 125,000,000; issued 36,057,592 and 35,661,297, respectively; outstanding 35,282,224 and 35,156,128, respectively

  

  

 4

  

  

  

 4

  

 

 
 Less: Treasury stock at cost, 775,368 and 505,169 shares, respectively

  

  

 (2,192

 )

  

  

 (1,265

 )

 

 
 Additional paid-in-capital

  

  

 132,528

  

  

  

 130,801

  

 

 
 Accumulated deficit

  

  

 (10,670

 )

  

  

 (7,343

 )

 

 
 Accumulated other comprehensive income (loss)

  

  

 41

  

  

  

 664

  

 

 
 Total Drilling Tools International shareholders' equity

  

  

 119,711

  

  

  

 122,861

  

 

 
 Non-controlling interest

  

  

 10

  

  

  

 12

  

 

 
 Total equity

  

  

 119,721

  

  

  

 122,873

  

 

 
 Total liabilities and shareholders' equity

  

 $

 228,591

  

  

 $

 222,181

  

 

  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  
3

 
  

 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

  

 Three Months Ended June 30,

  

  

 Six months ended June 30,

  

 

 
 (In thousands, except share and per share data)

  

 2026

  

  

 2025

  

  

 2026

  

  

 2025

  

 

 
 Revenue, net:

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Tool rental

  

 $

 29,572

  

  

 $

 32,756

  

  

 $

 58,482

  

  

 $

 67,289

  

 

 
 Product sale

  

  

 8,500

  

  

  

 6,665

  

  

  

 17,549

  

  

  

 15,012

  

 

 
 Total revenue, net

  

  

 38,072

  

  

  

 39,421

  

  

  

 76,031

  

  

  

 82,301

  

 

 
 Costs and other deductions:

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Cost of tool rental revenue

  

  

 7,655

  

  

  

 7,402

  

  

  

 15,405

  

  

  

 15,090

  

 

 
 Cost of product sale revenue

  

  

 3,258

  

  

  

 2,494

  

  

  

 6,620

  

  

  

 6,051

  

 

 
 Selling, general, and administrative expense

  

  

 19,896

  

  

  

 21,023

  

  

  

 40,122

  

  

  

 42,633

  

 

 
 Depreciation and amortization expense

  

  

 6,916

  

  

  

 6,830

  

  

  

 13,843

  

  

  

 13,552

  

 

 
 Interest expense, net

  

  

 1,111

  

  

  

 1,336

  

  

  

 2,124

  

  

  

 2,645

  

 

 
 Loss (gain) on asset disposal

  

  

 (2

 )

  

  

 85

  

  

  

 (2

 )

  

  

 72

  

 

 
 Goodwill impairment

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 1,901

  

 

 
 Other operating and non-operating expense, net

  

  

 1,106

  

  

  

 1,912

  

  

  

 1,882

  

  

  

 3,846

  

 

 
 Total costs and other deductions

  

  

 39,940

  

  

  

 41,082

  

  

  

 79,994

  

  

  

 85,790

  

 

 
 Income (loss) before income tax expense

  

  

 (1,868

 )

  

  

 (1,661

 )

  

  

 (3,963

 )

  

  

 (3,489

 )

 

 
 Income tax benefit (expense)

  

  

 76

  

  

  

 (746

 )

  

  

 633

  

  

  

 (587

 )

 

 
 Net income (loss)

  

 $

 (1,792

 )

  

 $

 (2,407

 )

  

 $

 (3,330

 )

  

 $

 (4,076

 )

 

 
 Less: Net income (loss) attributable to non-controlling interest

  

 $

 (4

 )

  

 $

 —

  

  

 $

 (2

 )

  

 $

 —

  

 

 
 Net income (loss) attributable to Drilling Tools International shareholders

  

 $

 (1,788

 )

  

 $

 (2,407

 )

  

 $

 (3,328

 )

  

 $

 (4,076

 )

 

 
 Basic earnings (loss) per share

  

 $

 (0.05

 )

  

 $

 (0.07

 )

  

 $

 (0.09

 )

  

 $

 (0.11

 )

 

 
 Diluted earnings (loss) per share

  

 $

 (0.05

 )

  

 $

 (0.07

 )

  

 $

 (0.09

 )

  

 $

 (0.11

 )

 

 
 Basic weighted-average common shares outstanding

  

  

 35,276,155

  

  

  

 35,573,749

  

  

  

 35,202,327

  

  

  

 35,583,139

  

 

 
 Diluted weighted-average common shares outstanding

  

  

 35,276,155

  

  

  

 35,573,749

  

  

  

 35,202,327

  

  

  

 35,583,139

  

 

 
 Comprehensive income (loss):

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Net income (loss)

  

 $

 (1,792

 )

  

 $

 (2,407

 )

  

 $

 (3,330

 )

  

 $

 (4,076

 )

 

 
 Foreign currency translation adjustment, net of tax

  

  

 131

  

  

  

 2,199

  

  

  

 (623

 )

  

  

 3,141

  

 

 
 Comprehensive income (loss):

  

  

 (1,661

 )

  

  

 (208

 )

  

  

 (3,953

 )

  

  

 (935

 )

 

 
 Less: comprehensive income (loss) attributable to non-controlling interest

  

  

 (4

 )

  

  

 —

  

  

  

 (2

 )

  

  

 —

  

 

 
 Comprehensive income (loss) attributable to Drilling Tools International shareholders

  

 $

 (1,657

 )

  

 $

 (208

 )

  

 $

 (3,951

 )

  

 $

 (935

 )

 

  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  
4

 
  

 DRILLING TOOLS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

  

 Common Stock

  

  

 Treasury Stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 (In thousands, except share and per share data)

  

 Shares

  

  

 Amount

  

  

 Shares

  

  

 Amount

  

  

 Additional
Paid-In
Capital

  

  

 Accumulated
Deficit

  

  

 Accumulated
Other
Comprehensive
Income (loss)

  

  

 Total Drilling Tools International Shareholders' Equity

  

  

 Non-controlling Interest

  

  

 Total Equity

  

 

 
 BALANCE, December 31, 2024

  

  

 34,704,696

  

  

 $

 3

  

  

  

 —

  

  

 $

 —

  

  

 $

 125,415

  

  

 $

 (3,582

 )

  

 $

 (1,877

 )

  

 $

 119,959

  

  

 $

 —

  

  

 $

 119,959

  

 

 
 Stock-based compensation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 541

  

  

  

 —

  

  

  

 —

  

  

  

 541

  

  

  

 —

  

  

  

 541

  

 

 
 Issuance of common stock related to business combination

  

  

 888,041

  

  

  

 1

  

  

  

 —

  

  

  

 —

  

  

  

 2,922

  

  

  

 —

  

  

  

 —

  

  

  

 2,923

  

  

  

 —

  

  

  

 2,923

  

 

 
 Foreign currency translation adjustment, net of tax

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 942

  

  

  

 942

  

  

  

 —

  

  

  

 942

  

 

 
 Net loss

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (1,669

 )

  

  

 —

  

  

  

 (1,669

 )

  

  

 —

  

  

  

 (1,669

 )

 

 
 BALANCE, March 31, 2025

  

  

 35,592,737

  

  

 $

 4

  

  

  

 —

  

  

 $

 —

  

  

 $

 128,878

  

  

 $

 (5,251

 )

  

 $

 (935

 )

  

 $

 122,696

  

  

 $

 —

  

  

 $

 122,696

  

 

 
 Stock-based compensation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 642

  

  

  

 —

  

  

  

 —

  

  

  

 642

  

  

  

 —

  

  

  

 642

  

 

 
 Purchase of treasury stock

  

  

 —

  

  

  

 —

  

  

  

 202,611

  

  

  

 (608

 )

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (608

 )

  

  

 —

  

  

  

 (608

 )

 

 
 Foreign currency translation adjustment, net of tax

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 2,199

  

  

  

 2,199

  

  

  

 —

  

  

  

 2,199

  

 

 
 Shares issued due to vesting of restricted stock units

  

  

 68,560

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

 

 
 Net loss

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (2,407

 )

  

  

 —

  

  

  

 (2,407

 )

  

  

 —

  

  

  

 (2,407

 )

 

 
 BALANCE, June 30, 2025

  

  

 35,661,297

  

  

 $

 4

  

  

  

 202,611

  

  

 $

 (608

 )

  

 $

 129,520

  

  

 $

 (7,658

 )

  

 $

 1,264

  

  

 $

 122,522

  

  

 $

 —

  

  

 $

 122,522

  

 

  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  
5

 
  

  
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

  

 Common Stock

  

  

 Treasury Stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 (In thousands, except share and per share data)

  

 Shares

  

  

 Amount

  

  

 Shares

  

  

 Amount

  

  

 Additional
Paid-In
Capital

  

  

 Accumulated
Deficit

  

  

 Accumulated
Other
Comprehensive
Income (loss)

  

  

 Total Drilling Tools International Shareholders' Equity

  

  

 Non-controlling Interest

  

  

 Total Equity

  

 

 
 BALANCE, December 31, 2025

  

  

 35,661,297

  

  

 $

 4

  

  

  

 505,169

  

  

 $

 (1,265

 )

  

 $

 130,801

  

  

 $

 (7,343

 )

  

 $

 664

  

  

 $

 122,861

  

  

 $

 12

  

  

 $

 122,873

  

 

 
 Stock-based compensation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 719

  

  

  

 —

  

  

  

 —

  

  

  

 719

  

  

  

 —

  

  

  

 719

  

 

 
 Treasury stock purchases

  

  

 —

  

  

  

 —

  

  

  

 206,800

  

  

  

 (706

 )

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (706

 )

  

  

 —

  

  

  

 (706

 )

 

 
 Restricted stock vesting

  

  

 219,831

  

  

  

 —

  

  

  

 63,399

  

  

  

 (221

 )

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (221

 )

  

  

 —

  

  

  

 (221

 )

 

 
 Stock option exercise

  

  

 20,000

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 60

  

  

  

 —

  

  

  

 —

  

  

  

 60

  

  

  

 —

  

  

  

 60

  

 

 
 Foreign currency translation adjustment, net of tax

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (754

 )

  

  

 (754

 )

  

  

 —

  

  

  

 (754

 )

 

 
 Net loss

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (1,540

 )

  

  

 —

  

  

  

 (1,540

 )

  

  

 2

  

  

  

 (1,538

 )

 

 
 BALANCE, March 31, 2026

  

  

 35,901,128

  

  

 $

 4

  

  

  

 775,368

  

  

 $

 (2,192

 )

  

 $

 131,580

  

  

 $

 (8,883

 )

  

 $

 (90

 )

  

 $

 120,419

  

  

 $

 14

  

  

 $

 120,433

  

 

 
 Stock-based compensation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 908

  

  

  

 —

  

  

  

 —

  

  

  

 908

  

  

  

 —

  

  

  

 908

  

 

 
 Treasury stock purchases

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

 

 
 Restricted stock vesting

  

  

 143,130

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

 

 
 Stock option exercise

  

  

 13,334

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 40

  

  

  

 —

  

  

  

 —

  

  

  

 40

  

  

  

 —

  

  

  

 40

  

 

 
 Foreign currency translation adjustment, net of tax

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 131

  

  

  

 131

  

  

  

 —

  

  

  

 131

  

 

 
 Net loss

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (1,788

 )

  

  

 —

  

  

  

 (1,788

 )

  

  

 (4

 )

  

  

 (1,792

 )

 

 
 BALANCE, June 30, 2026

  

  

 36,057,592

  

  

 $

 4

  

  

  

 775,368

  

  

 $

 (2,192

 )

  

 $

 132,528

  

  

 $

 (10,670

 )

  

 $

 41

  

  

 $

 119,711

  

  

 $

 10

  

  

 $

 119,721

  

 

  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  
6

 
  

 DRILLING TOOLS INTERNATIONAL CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED)
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 

  

 Six Months Ended June 30,

  

 

 
 (In thousands)

  

 2026

  

  

 2025

  

 

 
 Cash flows provided by (used in) operating activities:

  

  

  

  

  

  

 

 
 Net income (loss)

  

 $

 (3,330

 )

  

 $

 (4,076

 )

 

 
 Adjustments to reconcile net income (loss) to net cash from operating activities:

  

  

  

  

  

  

 

 
 Depreciation and amortization

  

  

 13,843

  

  

  

 13,552

  

 

 
 Amortization of deferred financing costs

  

  

 85

  

  

  

 174

  

 

 
 Non-cash lease expense

  

  

 2,611

  

  

  

 2,466

  

 

 
 Unrealized loss (gain) on currency translation

  

  

 (389

 )

  

  

 567

  

 

 
 Write off of excess and obsolete inventory

  

  

 11

  

  

  

 510

  

 

 
 Write off of excess and obsolete property and equipment

  

  

 —

  

  

  

 195

  

 

 
 Provision (recovery) for credit losses

  

  

 241

  

  

  

 356

  

 

 
 Deferred tax expense (benefit)

  

  

 (1,195

 )

  

  

 (1,766

 )

 

 
 Loss (gain) on sale of property

  

  

 (2

 )

  

  

 72

  

 

 
 Gain on sale of lost-in-hole equipment

  

  

 (7,249

 )

  

  

 (5,454

 )

 

 
 Stock-based compensation expense

  

  

 1,627

  

  

  

 1,183

  

 

 
 Interest income on related party note receivable

  

  

 (184

 )

  

  

 (182

 )

 

 
 Goodwill impairment

  

  

 —

  

  

  

 1,901

  

 

 
 Changes in operating assets and liabilities:

  

  

  

  

  

  

 

 
 Accounts receivable, net

  

  

 (6,159

 )

  

  

 453

  

 

 
 Prepaid expenses and other current assets

  

  

 (3,128

 )

  

  

 670

  

 

 
 Inventories

  

  

 (797

 )

  

  

 1,291

  

 

 
 Operating lease liabilities

  

  

 (2,446

 )

  

  

 (2,250

 )

 

 
 Accounts payable

  

  

 3,485

  

  

  

 (3,963

 )

 

 
 Accrued expenses and other current liabilities

  

  

 (2,490

 )

  

  

 (1,073

 )

 

 
 Net cash flows provided by (used in) operating activities

  

  

 (5,466

 )

  

  

 4,626

  

 

 
 Cash flows provided by (used in) investing activities:

  

  

  

  

  

  

 

 
 Acquisition of a business, net of cash acquired

  

  

 —

  

  

  

 (5,622

 )

 

 
 Purchase of intangible assets

  

  

 (762

 )

  

  

 (1,095

 )

 

 
 Proceeds from sale of property, plant, and equipment

  

  

 —

  

  

  

 38

  

 

 
 Purchase of property, plant, and equipment

  

  

 (11,916

 )

  

  

 (12,594

 )

 

 
 Proceeds from sale of lost-in-hole equipment

  

  

 8,992

  

  

  

 7,132

  

 

 
 Net cash flows provided by (used in) investing activities

  

  

 (3,686

 )

  

  

 (12,141

 )

 

 
 Cash flows provided by (used in) financing activities:

  

  

  

  

  

  

 

 
 Proceeds from exercise of stock options

  

 101

  

  

  

 —

  

 

 
 Payment of deferred financing costs

  

  

 (129

 )

  

  

 —

  

 

 
 Purchase of treasury stock

  

  

 (706

 )

  

  

 (608

 )

 

 
 Repayment of term loan

  

  

 (5,163

 )

  

  

 (2,500

 )

 

 
 Repayment of promissory note

  

  

 (462

 )

  

  

 (442

 )

 

 
 Proceeds from revolving line of credit

  

  

 35,789

  

  

  

 33,789

  

 

 
 Repayment on revolving line of credit

  

  

 (21,459

 )

  

  

 (27,791

 )

 

 
 Net cash flows provided by financing activities

  

  

 7,971

  

  

  

 2,448

  

 

 
 Effect of changes in foreign exchange rates

  

  

 53

  

  

  

 27

  

 

 
 Net change in cash

  

  

 (1,128

 )

  

  

 (5,040

 )

 

 
 Cash at beginning of period

  

  

 3,648

  

  

  

 6,185

  

 

 
 Cash at end of period

  

 $

 2,520

  

  

 $

 1,145

  

 

  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  
7

 
  

  
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization and Nature of Operations
 
Drilling Tools International Corporation, a Delaware corporation ("DTI" or the "Company"), is a global oilfield services company that designs, engineers, manufactures and provides a differentiated, rental-focused offering of tools for use in onshore and offshore horizontal and directional drilling operations, as well as other cutting-edge solutions across the well life cycle. 
 
The Company’s United States (“U.S.”) operations have locations in Texas, Louisiana, Oklahoma, Pennsylvania, North Dakota, New Mexico, Utah, and Wyoming. The Company’s international operations are located in Canada, the United Kingdom, Europe, the Middle East, and Asia-Pacific. Operations outside the U.S. are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws and possible limitations on foreign investment. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates.

 
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board ("FASB") and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). References to U.S. GAAP issued by the FASB in these notes to the accompanying unaudited condensed consolidated financial statements are to the FASB Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”). 

 
 
Unaudited Interim Financial Information
 
The accompanying interim unaudited condensed consolidated financial statements included in this quarterly report have been prepared in accordance with U.S. GAAP and, in the opinion of the Company, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2026, and its results of operations for the three and six months ended June 30, 2026 and 2025, respectively, and cash flows for the six months ended June 30, 2026 and 2025, respectively. The condensed consolidated balance sheet at December 31, 2025, was derived from the audited annual financial statements but does not contain all the footnote disclosures from the annual financial statements.
 
During the year ended December 31, 2025, the Company changed the presentation of its interim condensed consolidated statements of comprehensive income (loss) from a two-step format to a one-step format. Under the previous two-step format, operating income was presented as a subtotal. Under the new one-step format, all revenues are presented, followed by all expenses and losses, including income taxes, without the presentation of intermediate subtotals such as operating income. This change was made to simplify the presentation and enhance comparability with peer companies that use a similar format. The prior period’s statement of comprehensive income (loss) has been revised to conform to the current year’s presentation. This change in format does not affect the recognition, measurement, or classification of individual line items and has no impact on net income or other key financial metrics.

 
Emerging Growth Company
 
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt a new or revised standard. As such, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.

 
Use of Estimates
 

  
8

 
  

 The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assump