Drilling Tools International (NASDAQ:DTI) reported what executives described as a strong fourth quarter finish to 2025, highlighting resilient results despite a softer drilling backdrop and a declining global rig count. On the company’s year-end and fourth-quarter conference call, management emphasized free cash flow generation, debt reduction, and growth in its Eastern Hemisphere business as key themes heading into 2026.
2025 results and free cash flow focus
Chief Executive Officer Wayne Prejean said the company’s 2025 results came in “at or above the high end” of its guidance ranges, even as global rig count declined 7% year-over-year. For the full year, the company reported total rental revenues of $129.6 million and product sales revenues of $30.1 million, or $159.6 million on a consolidated basis.
Management also discussed its capital discipline during a softer market. Prejean said DTI used a flexible capital expenditure model and “pivoted to harvesting cash,” which helped fund more than $11 million of debt paydowns in the back half of 2025. The company also repurchased shares under its buyback program.
Fourth-quarter financial performance
Chief Financial Officer David Johnson said the company’s fourth-quarter results reflected its focus on managing costs and capital spending through typical seasonal softness. In the fourth quarter, DTI generated consolidated revenue of $38.5 million, including tool rental revenue of $30.4 million and product sales revenue of $8.1 million.
Net income attributable to stockholders was $1.2 million, or $0.03 per share. Adjusted net income was $1.5 million, or adjusted diluted EPS of $0.04 per share. Fourth-quarter adjusted EBITDA was $10.1 million, and adjusted free cash flow was $6.1 million.
Capital expenditures in the quarter totaled $4.0 million, with maintenance capital at approximately 10% of total revenue, according to Johnson. He added that maintenance capital is primarily funded by tool recovery revenue, which the company says helps keep the rental tool fleet “relevant and sustainable regardless of market trends.”
In the question-and-answer session, management addressed investor questions about the quarter’s EBITDA margin strength. Executives cited a combination of factors, including less typical seasonal softness, benefits from earlier cost reductions, and product mix. Management pointed specifically to product sales, including lost-in-hole and drilling ream tool-related sales, as supportive of overall margins.
Balance sheet, debt paydown, and buybacks
DTI ended 2025 with $3.6 million of cash and cash equivalents, net debt of $42.2 million, and a net leverage ratio of 1.1 times, down from 1.2 times a year earlier. Johnson noted that leverage improved despite the company taking on additional debt to fund the Titan Tools acquisition in 2025.
During the fourth quarter, DTI paid down $5.5 million of debt and approximately $11 million in the second half of 2025. The company also continued share repurchases in the second half of 2025, buying about $660,000 of common shares at an average price of $2.17 per share.
When asked about capital allocation in 2026, management said the company continues to evaluate a pipeline of M&A opportunities. Executives said uses of cash flow will include debt service, potential M&A, and buybacks, while noting that activity levels and evolving market conditions—including developments in the Middle East—will influence decisions.
Eastern Hemisphere growth and operational initiatives
DTI pointed to international expansion as a meaningful contributor to results in 2025. Prejean said Eastern Hemisphere revenue grew 78% year-over-year and accounted for approximately 14% of total revenue. Johnson added that 14% of total fourth-quarter revenue came from the Eastern Hemisphere segment.
Prejean said the company’s wellbore optimization product line has benefited from increased utilization of drilling ream tools and ClearPath stabilizer technology in the Eastern Hemisphere. He said the company expects demand tailwinds to continue as rig activity in Saudi Arabia stabilizes and selected programs are reactivated.
Management also discussed broader international opportunities. In response to a question about APAC, Prejean said the company’s Malaysian entity is operating and gaining traction, and that DTI is distributing technologies such as drilling reamers, Deep Casing products, and ClearPath product lines across Europe, the Middle East, and Asia Pacific.
Separately, Prejean highlighted ongoing progress under the company’s “One DTI” synergy program, including aligning operating divisions into integrated systems and onboarding business units into the COMPASS platform to manage assets and customer transactions. He said these steps streamline workflows, enhance accountability, and shorten timelines for integrating future acquisitions.
2026 guidance and Middle East commentary
DTI issued full-year 2026 guidance ranges that management said reflect year-over-year growth at the midpoint. The company’s outlook assumes activity will be “relatively flat” in the first half of 2026 and improve slightly in the second half.
- Revenue: $155 million to $170 million
- Adjusted EBITDA: $35 million to $45 million
- Capital expenditures: $18 million to $23 million
- Adjusted free cash flow: $17 million to $22 million
Prejean said there are potential upside catalysts not included in guidance, including rig reactivations in Saudi Arabia, incremental tenders in the broader Middle East, and increased project activity in certain international markets where the company has recently expanded.
On geopolitical developments, management discussed the conflict in the Middle East and its operational implications. Prejean said that as of the day before the call, the company’s Middle East personnel were accounted for, had sheltered in place per local government requirements, and were maintaining continuity with customer needs. He said DTI had experienced “minimal disruption” so far and had launched its crisis response plan. Executives cautioned that the impact is uncertain, but noted that most rigs were operating as of the call date.
During Q&A, management confirmed that the 2026 guidance was prepared before the latest Middle East developments. Prejean added that while the region remains a smaller part of overall revenue, it is “emerging and growing,” and the company believes its geographic diversification and fleet positioning provide flexibility as conditions evolve.
About Drilling Tools International (NASDAQ:DTI)
Drilling Tools International Corporation provides oilfield equipment and services to oil and natural gas sectors in North America, Europe, and the Middle East. It offers downhole tool rentals, machining, and inspection services to support the global drilling and wellbore construction industry. The company also provides products are bottom hole assembly components, such as stabilizers, subs, non-magnetic and steel drill collars, hole openers, and roller reamers, as well as drill pipe and drill pipe accessories; ancillary equipment and handling tools to support its rental platform, including float valves, ring gauges, tool baskets, lift bail, lift subs, mud magnets, elevators, bracket and bail assemblies, slips, tongs, stabbing guides and safety clamps; and blowout preventers, and pressure control accessory equipment.
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