Drilling Tools 2025 Q2 Earnings Strong Revenue Growth Amid Net Loss

Drilling Tools (DTI) reported its fiscal 2025 Q2 earnings on August 14, 2025. The company delivered revenue growth but swung to a loss, falling short of earnings expectations. DTI maintained its full-year revenue guidance but signaled continued pricing pressures ahead.

Revenue
Revenue for Drilling Tools increased by 5.0% year-over-year to $39.42 million in the second quarter of 2025. The performance was driven primarily by the tool rental segment, which accounted for $32.76 million of the total revenue. Product sales contributed an additional $6.67 million. These two streams combined to form the company’s total revenue, net, of $39.42 million.

Earnings/Net Income
Drilling Tools posted a net loss of $2.41 million in the second quarter of 2025, a significant deterioration from the net income of $365,000 in the same period a year earlier, representing a 759.5% decline. On a per-share basis, the company swung to a loss of $0.07 from a profit of $0.01 in the prior-year quarter, a negative change of 800.0%. The earnings results indicate a challenging quarter for profitability.

Price Action
Shares of Drilling Tools rose by 12.30% on the latest trading day, but the stock lost all of those gains over the past week, closing flat. Month-to-date, the stock has declined by 6.67%, reflecting mixed near-term investor sentiment.

Post Earnings Price Action Review
The performance of a strategy involving buying DTI shares on the earnings release date and holding for 30 days was exceptionally poor, yielding a negative compound annual growth rate of -25.65% and an excess return of -115.33%. The Sharpe ratio of -0.51% highlights the negative risk-adjusted returns of the strategy, with no maximum drawdown recorded. This underperformance suggests that investors who bought on the earnings day were exposed to significant downside risk with no upside potential.

CEO Commentary
R. Wayne Prejean, CEO of Drilling Tools, highlighted strong Q2 performance, including a 5% revenue increase and a 4% rise in adjusted EBITDA. These results were attributed to strategic initiatives such as recent acquisitions in the Eastern Hemisphere, cost reductions, and strong rental performance. However, Prejean also noted challenges, including a decline in deep casing sales and market softness in the Middle East and Mexico. He emphasized progress in geographic diversification and operational integration, including the successful relocation of a U.S. repair facility. Prejean expressed cautious optimism, noting the momentum from recent acquisitions and cost control measures, despite ongoing pricing pressures and a global decline in rig counts. He reaffirmed confidence in the company’s ability to adapt and deliver value amid an uncertain energy landscape.

Guidance
Drilling Tools reaffirmed its 2025 full-year revenue guidance of $145 million to $165 million, along with adjusted EBITDA guidance of $32 million to $42 million. The company also provided capital expenditure guidance of $18 million to $23 million and adjusted free cash flow of $14 million to $19 million. Management expects continued pricing pressures and margin compression in the third and fourth quarters but noted that activity declines are expected to slow compared to earlier in the year. The company remains focused on cost reductions and has contingency plans in place to maintain operational flexibility in response to potential further market deterioration.

Additional News
In recent weeks, Drilling Tools made strategic moves to strengthen its market position. The company finalized the acquisition of two Eastern Hemisphere-based drilling support businesses, expanding its geographic footprint and enhancing its rental capabilities in key emerging markets. These acquisitions are expected to integrate smoothly with existing operations, contributing to long-term growth. Additionally, Drilling Tools announced a restructuring initiative led by its Chief Operating Officer, who will oversee the integration of the newly acquired entities. No dividend or share repurchase plans were announced, with the company emphasizing cost management and capital efficiency over shareholder returns in the near term.