Drilling Tools International Conference Call to Discuss Saltire Acquisition - DRILLING TOOLS INTERNATIONAL CORP

Explicit Guidance:

• FY2026 Revenue: Pro forma revenue expected to reach $205–$220 million for the combined entity.
• FY2026 Adjusted EBITDA: Pro forma adjusted EBITDA expected between $58–$68 million.
• FY2026 Adjusted EBITDA Margin: Pro forma margin expected to be 28–31%.
• FY2026 Adjusted Free Cash Flow (FCF): Pro forma adjusted FCF expected to range from $33–$38 million.
• FY2026 Synergy Assumptions: Accretion to adjusted EBITDA margin and adjusted FCF per share in Year 1 is based on standalone performance; the transaction does not rely on cost savings, revenue synergies, or pricing improvements (synergies represent upside).
• Debt Leverage: Pro forma net debt to trailing 12-month adjusted EBITDA expected to be approximately 2.2x at closing; target to reduce leverage to approximately 1.0x within 24 months of closing.
• Transaction Timing: Expected closing date is the first quarter of 2027.

Business-Segment Outlook:

• Geographic Shift: Combined company Eastern Hemisphere revenue expected to jump from ~14% (DTI 2025) to ~40% of pro forma revenue, driven by Saltire's established presence in the North Sea, Middle East, and Eastern Hemisphere growth markets.
• Fleet Growth: Total rental fleet expected to increase from approximately 63,000 tools to >100,000 tools.
• Revenue Contributions: Saltire adds approximately $50.4 million in run-rate revenue and $22.5 million in adjusted EBITDA (approx. 45% margin).
• Product & Technology: Opportunity to deploy DTI technologies (ClearPath, Drill and Ream, deep casing technology) across Saltire's distribution network to serve customers drilling unconventional shale-style wells and offshore operations.
• Customer Base: Expansion into national oil companies (NOCs) and international operators not historically served at scale by DTI; retention of existing select large service company customers.
• Operational Model: Preservation of Saltire's management team and culture; retention of ~30% of combined company equity by the Logie family to align long-term interests.

Market and Competitive Outlook:

• Eastern Hemisphere Market Size: Cited as a large, growing market with ~910 active rigs and $69 billion in expected drilling/completion spending in 2026, projected to reach $88 billion by 2030.
• Growth Drivers: Middle East expected to lead with the fastest rig count growth of any region.
• Competitive Dynamics: Shift toward category-driven product contract lines in the region; increased scale expected to provide "commercial power" to win larger contracts against commodity distribution competitors.
• Operational Stability: Management asserts business continuity in the Middle East despite ongoing conflicts, with operators managing logistics around skirmishes and NOCs pivoting to leaner supply chains.
• Strategic Fit: Market rewards reliability, technical capability, and service quality, which supports higher and more consistent margins for the combined platform.

Macro / Industry Outlook:

• Regional Economic View: Middle East and Eastern Hemisphere identified as primary sources of future growth relative to North American stability.
• Conflict Impact: Management views geopolitical disruptions in the Middle East as manageable "off and on" issues rather than structural threats to operations.
• Industry Consolidation: Confirmed commitment to being a "disciplined consolidator" in a fragmented industry, pursuing only opportunities that strengthen the platform.
• Customer Trends: Major customers actively seeking to extend contracts due to confidence in management, safety, and financial strength; demand for "one-stop shop" solutions increasing.

Strategic Initiatives:

• Acquisition Execution: Definitive agreement entered to acquire Saltire Energy Limited and Foxley Energy Limited; transaction valued at ~5.5x Saltire's run-rate adjusted EBITDA.
• Financing Structure: Cash consideration of $80 million to be funded via new debt financing and borrowings under existing credit facilities.
• Capital Allocation: Primary use of free cash flow post-closing will be debt repayment to achieve 1.0x leverage target, alongside high-return growth investments; high return growth investments will further support FCF generation.
• Regulatory Compliance: Intention to file Form S-4 registration statement with SEC (including proxy/prospectus) and maintain ongoing communication with stockholders.
• Management Continuity: All Saltire management to remain with the combined company; Mike Logie to assist with customer/employee transition.

Risks and Headwinds to Outlook:

• Transaction Completion Risks: Potential failure to close due to unsatisfied closing conditions, lack of required regulatory approvals, or financing risks.
• Integration Risks: Potential challenges in integrating two global platforms, though management notes limited customer overlap and similar operating models.
• Market Conditions: External factors including market volatility, geopolitical escalation (specifically in the Middle East), and supply chain disruptions could impact transaction timing or benefits.
• Valuation Risks: Share consideration value will fluctuate with DTI's stock price; transaction multiple (5.5x) is a premium to DTI's current trading multiple.
• Update Disclaimer: Forward-looking statements reflect views as of October 8, 2026; actual results may differ materially due to risks, uncertainties, and contingencies.

Management Tone on the Future:

• Confidence Level: High; described as a "low-risk, high-return opportunity" and a "3-foot putt" rather than a long shot.
• Conviction: Strong alignment between DTI and Logie family, evidenced by the Logie family retaining a significant stake and Mike Logie staying on to ensure success.
• Strategic Clarity: No bet on new products or aggressive synergy targets; confidence grounded in the standalone performance of two complementary rental tool businesses.
• Growth Outlook: Belief that "the best is still ahead" for the combined entity, with immediate accretion and a clear path to deleveraging.

Miscellaneous:

• Transaction Date/Context: Call conducted on October 8, 2026; announcement covers the acquisition of Saltire Energy and Foxley Energy.
• Consideration Details: Approx. $80 million cash + 17.4 million shares of DTI common stock (fixed share count, variable value).
• Non-GAAP Measures: Management utilizes adjusted EBITDA, adjusted EBITA margin, and adjusted free cash flow; reconciliations available in prior filings and investor presentations.