Drilling Tools International Corporation · NASDAQ:DTI
Drilling Tools International — Q3 2023 Earnings Presentation
38 slides from Drilling Tools International's earnings presentation, Nov 13, 2023
Slide 1: Investor Presentation November 2023
Exhibit 99.2 Investor Presentation November 2023
Slide 2: Disclaimers
Disclaimers General: Drilling Tools International Corporation (“DTI”) is making this presentation available in connection with the release of its financial results for the three and nine months ended September 30, 2023. The information contained in this presentation does not purport to be all-inclus
Slide 3: Disclaimers (Cont'd)
Disclaimers (Cont’d) Rounding: Certain monetary amounts, percentages and other figures included in this presentation have been subject to rounding adjustments. Certain other amounts that appear in this presentation may not sum due to rounding. Trademarks: This presentation contains trademarks, servi
Slide 4: Table of Contents
Table of Contents Business Overview 4 Financial Overview and Growth Opportunities 26 Appendix 30 Recent Milestones 35 3
Slide 5: Business & Market Overview
INTERNATIONAL 4 S ims S) = = = ce Q e Business & Market Overview
Slide 6: Significant Industry Tailwinds & Supportive Macro Backdrop
Significant Industry Tailwinds & Supportive Macro Backdrop A combination of elevated commodity prices, increased rig count and capital spending creates a highly constructive market backdrop (1) (2) Historical Rig Count Historical Commodity Pricing (3) (4) Historical Feet Drilled E&P Capital Spending
Slide 7: DTI is a Leading Rental Provider of Mission Critical Drilling Tools
DTI is a Leading Rental Provider of Mission Critical Drilling Tools A platform developed and designed to keep up with the ever-changing requirement of our customers 65,000+ Global ~40 years 4 segments DTI manages & DTI has a global DTI’s history began in DTI operates across maintains a fleet of foot
Slide 8: The Rental Tool Business & DTI's Value Proposition
The Rental Tool Business & DTI’s Value Proposition Why do E&P operators and some service providers prefer to rent rather than buy? Given the complexity of modern drilling, completions and workover programs, most drillers and service providers prefer to focus on core competencies and rely on third-pa
Slide 9: Expansive Offering to Supply Drilling Tools Required in a Typical Job
Expansive Offering to Supply Drilling Tools Required in a Typical Job Diverse and extensive inventory of tools to address the wide-ranging needs of oil & gas customers across all regions Blow Out Preventer Represents Key DTI Rental Product Crossover Subs Hevi-Wate Drill Pipe Drill Pipe Non-Magnetic
Slide 10: A Market Leader in Downhole Tools for the Oil & Gas Industry
A Market Leader in Downhole Tools for the Oil & Gas Industry Leading provider of downhole drilling equipment rentals to North American onshore and offshore markets, as well as select international locations, with a highly competitive suite of differentiated products serving blue-chip E&P operators a
Slide 11: How Did We Get There? DTI Has a Long History of Success
How Did We Get There? DTI Has a Long History of Success DTI’s history began in 1984 when it was founded as Directional Rentals to provide equipment to offshore drillers ⚫ In 2012, Hicks Energy Partners acquired a majority interest in Directional Rentals before merging with Allegiant Tool & Machine t
Slide 12: Our Proven Track-Record in Executing & Integrating M&A
Our Proven Track-Record in Executing & Integrating M&A Management boasts a proven track record in strategic acquisitions highlighted by the integration of 4 businesses since 2012 Select Acquisitions Target Rental Tools Year 2013 2014 2018 2018 Acquired ⚫ Purchased their entire ⚫ Manufactures, rents
Slide 13: Scale Matters: Operations Across All Major Operating Basins in North America
Scale Matters: Operations Across All Major Operating Basins in North America 16 service centers, shops, distribution and repair centers located strategically across North America to service all major oil & gas basins, providing solutions with minimal logistics required Major US Basins Serviced by DT
Slide 14: Strong Permian Presence in both Midland and Delaware Basins
Strong Permian Presence in both Midland and Delaware Basins DTI has an extensive footprint within the Permian Basin, providing numerous services to clients operating in one of the most prolific oil and gas basin (1) Midland DTR Campus Space (sq. ft.) 57,246 Acres 14 Segments Served DTR Midland DNR F
Slide 15: Modernized Manufacturing and Repair Facility
Modernized Manufacturing and Repair Facility 35,840 square foot facility located on a ten-acre campus in Broussard, Louisiana ⚫ Machine and repair equipment ensures product quality, increases product life and improves fleet utilization ⚫ Facility equipment includes hollow spindle lathes, CNC mills,
Slide 16: DTI's COMPASS Order Management System = Key Differentiator
DTI’s COMPASS Order Management System = Key Differentiator DTI’s proprietary customer order management system provides valuable information to the company for use in making data-based capital allocation and pricing decisions Unique, Proprietary Software and Support System Customized, Automated and A
Slide 17: ESG + Safety Are Integral to Our Success
ESG + Safety Are Integral to Our Success DTI is committed to environmental stewardship by: ✓ Performing continuous evaluations and implementing control measures to ensure minimization of waste Environmental ✓ Striving for the highest levels of operational proficiency to reduce rework, use of chemica
Slide 18: Overview of DTI's Core Product and Service Offering
Overview of DTI’s Core Product and Service Offering ($Millions) Product / Service 2020A – 2023E Revenue Profile Key Products / Features Offering $93 - $95 ⚫ Roller reamers $78.0 ⚫ Stabilizers (standard, directional, integral blade, sleeve type, motor / ⚫ Hole openers MWD and RSS sleeve) $47.6 Direct
Slide 19: Overview of Directional Tool Rentals
Overview of Directional Tool Rentals Key Equipment Stabilizers Reduces drill string vibration and torque… Drill Collars Adds weight to the BHA to increase rate of penetration (“ROP”) and reduce vibration… Subs and Other Equipment Roller Reamers / Hole Openers Variety of subs, crossovers and handling
Slide 20: Overview of Wellbore Optimization Tools
Overview of Wellbore Optimization Tools Specialty tools division with a focused group of field sales and service professionals providing rig site visits and customer service, enabling consistent product performance and customer satisfaction Products Offered Substantial Improvements in Wellbore Quali
Slide 21: Overview of Premium Tools
Overview of Premium Tools Key Equipment DTI offers a wide array of premium tubulars for drilling, workover and completion operations, API blowout preventers and pressure control accessories as well as a comprehensive suite of related handling tools Tubulars Handling Tools API BOPs and Pressure Contr
Slide 22: Other Products and Services
Other Products and Services Products Offered Internal Support Services and Emerging Products ⚫ Independent inspection services equipment of all DTI divisions and select external customers Downhole ⚫ Critical to efficient operations Inspection Solutions ⚫ Services across North America including netwo
Slide 23: Blue-Chip Customer Base Across E&Ps & OFS Companies
Blue-Chip Customer Base Across E&Ps & OFS Companies DTI has established an exceptional customer base that includes blue-chip E&P operators and many of the largest oilfield services companies ⚫ First-call supplier for leading oilfield service providers in North America ⚫ Over the last decade, DTI has
Slide 24: DTI Sales Team Covers Global Markets
DTI Sales Team Covers Global Markets The Sales and Corporate Strategy teams cover customer decision makers at all organizations levels, globally ✓ DTI Sales Organization Coverage Sales Organization Covers Every Major U.S. Basin and Several North America International Attractive International Markets
Slide 25: Significant Upside Through Continued Consolidation
Significant Upside Through Continued Consolidation DTI believes that its established M&A framework and robust M&A pipeline will allow it to rapidly consolidate the oilfield service rental tool industry ⚫ Has reviewed more than 100 potential acquisition targets, with approximately 20 targets in the c
Slide 26: Experience Matters! – The DTI Leadership Team
Experience Matters! – The DTI Leadership Team Experienced, talented, and committed management team with history of success Wayne Prejean Mike Domino David Johnson Jim Rowell President & Chief President, Directional Tool Chief Financial VP, Premium Tools Executive Officer Rentals Division Officer Ald
Slide 27: Financial Overview and Growth Opportunities
Financial Overview and Growth Opportunities 26
Slide 28: Attractive Financial Profile
Attractive Financial Profile ($Millions) Generated positive Adjusted EBITDA margins and cash flow through the pandemic, and now boasts among the top margins and cash flow profiles in the industry Revenue Commentary $150 - $158 $129.6 $77.4 Strong and $67.6 Increasing Revenue Profile 2020A 2021A 2022
Slide 29: Smart Capital Expenditures
Smart Capital Expenditures ($Millions) Increase in 2023 Growth Capital spending to support stronger adjusted free cash flow in 2024+ translating to lower YE 2023 adjusted free cash flow Components of Adjusted EBITDA Commentary Adjusted Free Cash $6 - $8 (1) Flow can be directly influenced by Growth
Slide 30: Strong Growth Driven by all DTI Products
Strong Growth Driven by all DTI Products… ($Millions) Revenue Growth by Product CAGR ’20A – ’23E Total: 30% – 33% $150 - $158 30% - 49% $4 - $6 129.6 $27 - $29 45% - 48% $3.5 $22.7 18% - 21% $26 - $28 $25.3 77.4 67.6 $5.6 $1.8 $6.3 $8.9 $17.8 $15.8 31% - 32% $93 - $95 $78.0 $47.6 $41.2 2020A 2021A 2
Slide 31: Appendix
INTERNATIONAL DRILLING TOOLS° e Appendix
Slide 32: Reconciliation of Adjusted EBITDA
Reconciliation of Adjusted EBITDA (1)(2) ($ in thousands) 2020A 2021A 2022A 2023E Net income $(18,525) $2,101 $21,080 $11,576 - $18,976 Interest expense, net 2,954 1,229 477 500 – 1,300 Income tax expense/(benefit), net (5,034) (209) 3,697 6,500 – 7,000 Depreciation and amortization 23,814 21,718 19
Slide 33: Reconciliation of Adjusted Free Cash Flow
Reconciliation of Adjusted Free Cash Flow (1) ($ in thousands) 2020A 2021A 2022A 2023E Net income $(18,525) $2,101 $21,080 $11,576 - $18,976 Interest expense, net 2,954 1,229 477 500 – 1,300 Income tax expense/(benefit), net (5,034) (209) 3,697 6,500 – 7,000 Depreciation and amortization 23,814 21,7
Slide 34: Risk Factors
Risk Factors Risk Factors Summary Certain factors may have a material adverse effect on our business, financial condition and results of operations. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we curren
Slide 35: Risk Factors (Cont'd)
Risk Factors (Cont’d) Risks Relating to Ownership of Our Common Stock • We may not meet the expectations of the market or achieve the performance indicated in this Presentation. • The price of our securities may be volatile and may trade significantly below the price you pay for them. • Our financia
Slide 36: Recent Milestones
(ORILLING TOOLS” INTERNATIONAL Recent Milestones
Slide 37: Nasdaq Composite / listing milestone
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Slide 38: 2023 Financial Outlook
2023 Financial Outlook Reiterating outlook for growth and profitability in 2023 ✓ Rig counts have stabilized across the US and Canada ✓ We still expect to achieve attractive margins and growth in 2023 ✓ Revenue and Adjusted EBITDA forecasted to grow between 16% - 22% and 21% - 31% vs. 2022, respecti
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