Drilling Tools International Corporation · NASDAQ:DTI
Drilling Tools International — FY2023 Earnings Presentation
39 slides from Drilling Tools International's earnings presentation, Mar 28, 2024
Slide 1: 2023 Investor Presentation
www.drillingtools.com 2023 Investor Presentation March 28, 2024
Slide 2: General and Forward-Looking Statements
General: Drilling Tools International Corporation (“DTI”) is making this presentation available in connection with the release of its financial results for the 12 months ended December 31, 2023. The information contained in this presentation does not purport to be all-inclusive or to contain all inf
Slide 3: DTI is a Leading Rental Provider of Mission Critical Drilling Tools
2 DTI is a Leading Rental Provider of Mission Critical Drilling Tools A platform developed and designed to keep up with ever-changing customer needs 65,000+ DTI manages & maintains a fleet of over 65,000 rental tools and drilling equipment Global DTI has sales and distribution channels across North
Slide 4: Significant Industry Tailwinds & Supportive Macro Backdrop
1) Baker Hughes2) Arizton Advisory and Intelligence3) Spears Directional Drilling Market Report – Q4 2023. Only includes number of feet drilled through reservoir rock, excludes vertical part of well 4) Evercore ISI 2024 Global E&P Spending Outlook 3 A combination of commodity prices, rig count and c
Slide 5: 2024 Financial Outlook
Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” in the appendix for a reconciliations to the most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).
Slide 6: Sustainable Growth – Executing on Plan
Sustainable Growth – Executing on Plan 5 Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” in the appendix for a reconciliations to the most directly comparable financial measures calculated and presented in accordance with U.S. generally
Slide 7: Components of Adjusted EBITDA and Capital Expenditures
6 Components of Adjusted EBITDA Commentary ($Millions) Increased Growth Capital spending in 2023 now supports stronger Adj. Free Cash Flow in 2024+ Source: Company financials and management estimates. 2024E represents the Company’s outlook as of March 27, 2024 shown on page 4 Adjusted Free Cash Flow
Slide 8: Peer Adj. Free Cash Flow Margin Comparisons
Peer Adj. Free Cash Flow Margin Comparisons 7 Peer group includes BKR, BOOM, OIS, RES, RNGR, WHD, and XPRO Adjusted Free Cash Flow Margin is defined as Adjusted EBITDA less Gross Capital Expenditures divided by Total Revenue Uses midpoint of DTI's 2024 guidance and FY24 consensus estimates for peer
Slide 9: Peer Leading Return on Capital Employed (ROCE)
Peer Leading Return on Capital Employed (ROCE) 8 - Peer group includes BKR, BOOM, OIS, RES, RNGR, WHD, and XPRO - ROCE is defined as EBIT divided by Capital Employed (Total Assets - Total Current Liabilities) 2023 Actual 9.76x 4.49x 3.06x 8.57x 6.73x 5.92x 5.21x 1.65x EV/EBITDAMultiple
Slide 10: About Us
(ORILLING TOOLS* INTERNATIONAL About Us
Slide 11: A Market Leader in Downhole Tools for the Oil & Gas Industry
10 A highly competitive suite of differentiated products A Market Leader in Downhole Tools for the Oil & Gas Industry Core Product and Service Offering 61% of 2023 Revenue 17% of 2023 Revenue Rental tools used in bottom hole assemblies (“BHA”) adjacent to the drill bit More than 30 categories of too
Slide 12: Presence Across All Major Basins in North America
11 Presence Across All Major Basins in North America Expanding footprint in Europe, Middle East, North Africa & Asia DTI Corporate Headquarters DTI Service Centers (DTR, DNR, & DIS) Drill-N-ReamTM Premium Tools Division (PTD) Stocking Points (DTR & DNR) Inspection and Repair (DIS & DMS) Production P
Slide 13: Blue-Chip Customer Base Across E&Ps & OFS Companies
Blue-Chip Customer Base Across E&Ps & OFS Companies 12 Revenue by Customer (%) December 31, 2023 Select DTI Customers First-call supplier for leading oilfield service providers in North America DTI has actively expanded its customer base to further diversify its customer mix >40% of revenues from cu
Slide 14: Executing Our Strategic Plan & Delivering Improved Results
13 Executing Our Strategic Plan & Delivering Improved Results Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” in the appendix for a reconciliations to the most directly comparable financial measures calculated and presented in accordance
Slide 15: Why Do Customers Rent Downhole Tools?
14 Why Do Customers Rent Downhole Tools? Outsources Logistics, Inspection, Storage & Maintenance Eliminates Equipment Redeployment Risk Immediate Equipment Availability Fill Equipment Supply Gaps Focus Capex On Core Operations Why rent from DTI? Our Rental Offering Provides Customer Efficiency & Val
Slide 16: Key Operational Differentiators
15 Machine and repair equipment ensures product quality, increases product life and improves fleet utilization Ability to manufacture most of our rental tools enables cost reduction & control of supply chain Key Operational Differentiators Modern Manufacturing and Repair Facility Unique, Proprietary
Slide 17: Organic Growth Drivers
16 Organic Growth Drivers Proprietary Examples: RotoSteerTM / Drill-N-ReamTM / SafeFloatTM DTI scale, leveraging global footprint of distribution and sales channel Expanding scope of tools & services in existing product lines through technological advancements Further customer penetration, growing r
Slide 18: M&A Growth Strategy: Significant Consolidation Upside
17 M&A Growth Strategy: Significant Consolidation Upside Established framework and robust pipeline to strategically consolidate the oilfield service rental tool industry Overview of DTI’s M&A Framework M&A Pipeline DTI’s 325+ MSAs, many of which are with leading service companies and E&P operators,
Slide 19: Strategic Rationale: Superior Drilling Products
18 Strategic Rationale: Superior Drilling Products Enhances vertical integration of differentiated technology Cost savings on Drill-N-ReamTM tool Synergies - eliminates duplicative public company costs Adds significant precision manufacturing capacity Enhances horizontal opportunities Expands DTI’s
Slide 20: Strategic Rationale: Deep Casing Tools
19 Strategic Rationale: Deep Casing Tools Adds to DTI’s technology platform Expands intellectual property portfolio by over 60 patents Adds strong international customer relationships ADNOC / ARAMCO / PEMEX / PETROBRAS / PETRONAS Accretive to DTI’s earnings and Adj. Free Cash Flow profile Opportunit
Slide 21: The DTI Leadership Team – Experience Matters!
20 The DTI Leadership Team – Experience Matters! Experienced, talented, and committed management team with history of success Wayne Prejean President & Chief Executive Officer Mike Domino President, Directional Tool Rentals Division David Johnson Chief Financial Officer Jim Rowell VP, Premium Tools
Slide 22: DTI's Differentiated Growth Strategy Creates a Compelling Investment Profile
21 DTI’s Differentiated Growth Strategy Creates a Compelling Investment Profile
Slide 23: Supplemental Information
22 Supplemental Information
Slide 24: ESG + Safety Are Integral to Our Success
ESG + Safety Are Integral to Our Success 23 A majority of our directors are independent for the purposes of the applicable Nasdaq and Securities and Exchange Commission rules. Identify and control exposures to limit potential injury and production interruptions or damages Continual contributions to
Slide 25: Expansive Offering to Supply Drilling Tools Required in a Typical Job
24 Expansive Offering to Supply Drilling Tools Required in a Typical Job Blow Out Preventer Drill Pipe Hevi-Wate Drill Pipe Crossover Subs Spiral Drill Collar Drill-N-ReamTM RotoSteerTM Stabilizer Bit Sub Represents Key DTI Rental Product Differentiated and extensive inventory of tools to address th
Slide 26: Overview of Directional Tool Rentals
25 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 Variety of subs, crossovers and handling tools used in the drill st
Slide 27: Overview of Wellbore Optimization Tools
DTI distributes the Drill-N-Ream pursuant to a distribution agreement with Superior Drilling Products, Inc., the owner of the relevant patent. 26 Overview of Wellbore Optimization Tools Products Offered Drill-N-ReamTM (“DNR”) WellBore Conditioning Tool(1) Patented technology allows the tool to maint
Slide 28: Overview of Premium Tools
27 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 Overview of Premium Tools Key Equipment Tubulars Drill Pipe – 2 to 5 inch API bottleneck
Slide 29: Other Products and Services
28 Other Products and Services Products Offered Internal Support Services and Emerging Products Downhole Inspection Solutions Independent inspection services equipment of all DTI divisions and select external customers Critical to efficient operations Services across North America including network
Slide 30: 2023 Income Statement
2023 Income Statement Drilling Toots International Corp. Consolidated Statement of perations and Comprehensive income {Inthousands of US. dollars and rounded) (Unauatea) Revenus, net: Tol renal S929 s Product ale Total revenue.net (Operating costs and expenses: Costoftol rectal verse 27581 Cost of r
Slide 31: Fourth Quarter 2023 Income Statement
30 Fourth Quarter 2023 Income Statement
Slide 32: 2023 Balance Sheet
2023 Balance Sheet (DRILLING TOOLS* INTERNATIONAL, Drilling Tools International Corp. Consolidated Balance Sheets (In thousands of U.S. dollars and rounded) (Unaudited) ASSETS Current assets Cash Accounts receivable, net Inventories, net Prepaid expenses and other current assets Investments - equity
Slide 33: 2023 Cash Flow Statement
2023 Cash Flow Statement RILLING p
Slide 34: Reconciliation of 2023 Adjusted EBITDA
33 Reconciliation of 2023 Adjusted EBITDA
Slide 35: Reconciliation of Fourth Quarter 2023 Adjusted EBITDA
34 Reconciliation of Fourth Quarter 2023 Adjusted EBITDA
Slide 36: Reconciliation of 2023 Adjusted Free Cash Flow
35 Reconciliation of 2023 Adjusted Free Cash Flow
Slide 37: Reconciliation of Fourth Quarter 2023 Adjusted Free Cash Flow
36 Reconciliation of Fourth Quarter 2023 Adjusted Free Cash Flow
Slide 38: Reconciliation of 2024 Outlook
37 Reconciliation of 2024 Outlook
Slide 39: Reconciliation of 2024 Outlook
38 Reconciliation of 2024 Outlook
Drilling Tools International — FY2023 Earnings Presentation on 6ix