WHD - Earnings call transcript Q2 2020

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Operator

Good morning and welcome to the Cactus Second Quarter 2020 Earnings Call. My name is Joanna and I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise.

For those of you on the stream, please take note of the options available in your event console. [Operator Instructions] As a reminder, please limit your question to one and then one follow-up question. you. Thank I turn time, to show like Mr. would this the to over At of IR. Development Fitzgerald, Corporate John Director and Sir, please go ahead.

John Fitzgerald

Isaac, be Operations; on Thank Chief Bender, you in call Executive speakers participation us Tadlock, Vice Also and President our forward-looking are appreciate or Yesterday We comments release and any our Chief website. Administration. expectations our President our covered will issued website. of release, Officer; our Vice today's Financial which Steve and we events, good that projections Private President General today's Joel Steven morning, the call. Bender, Operating by earnings earnings and Yesterday everyone. Vice we Reform Scott David for future issued make Officer; Chief is Bender, Counsel of joining Officer. Securities which our your statements today The our on Litigation note our is on available available are Act. today's on Please regarding we call, Senior

publicly Forward-looking the and risk listeners or statements in factors to are earnings today These release expectation. from advise and of review current control. risks our the forward-looking our SEC. filings beyond any review statements. statements only of actual our update discussed undertake today's subject obligation of we no with as risks number uncertainties, our many Any and can to differ forward-looking are which cause We results materially to to make uncertainties are we date a and

measures that, to turn earnings the most call Reconciliations Scott. will reference are non-GAAP GAAP measures. to these we the of non-GAAP will call, today's comparable our I measures release. included in during certain addition, In With directly financial

Scott Bender

higher we oil remain activity be marginally the looks we have barrel, capacity. morning, existing to Good Nonetheless, remain activity that among completion a expectations needed then in recovered for expect to Rig Thanks, support levels everyone. we streamlining first quarter bottom and the appear U.S, the than approaching have committed to our rapidly previously prices to to to John. below Count industry $XX Since is we a industry. our approximately the as Last set realistic were current to further trough forecasted. operations

than quarter second Cactus. better was expected for The

the drilling completion demonstrated of Adjusted XX%. approximately was were more $XX fell EBITDA million. generation. by and Although, EBITDA business over activity margins $XX the quarter in second half, cash In and U.S. were free through cost Adjusted we significant than industry this margins nature summary, variable flow million. EBITDA revenues

million Tadlock, results. dividend will turn we balance over CFO, $XXX cash per increased call to share. a and our $XX to paid million quarterly review our who now by Our of Steve $X.XX the I'll financial

provide lines Steve I'll term for Q&A. some on the thoughts opening for remarks his near our Following the before outlook

Steve Tadlock

Thanks, in million Scott. XX% than XX% a significantly to received was basis $XX sequentially, of In prior increased revenues, to U.S. than the of more at quarter-over-quarter. margins QX by as quarter. lower were $XX Product million XX% revenues onshore were lower million Count revenues gross fell Rig Product in XX% the $XX industry Rental were related decrease tariff part during activity. lower quarter. from first revenues completion XX% $X.X XXX attributable down due points on quarter. basis to the the up The sequential benefits million,

of quarter, quarter. of to Field branch Although during cost This positive maintain million, were and through slightly and other XX% down a revenues QX just combined of XX% in expenditures. basis, represented reductions were related gross the declined expectations. on direct able $XX product first in from under margins service we and both sequential revenues margins ahead achievement the rental the

our by decrease to and stock-based sequentially The approximately in to quarter. basis Gross lower million primarily the to and X.X were quarter. lower million sequentially, attributable third margins service better decreased largely fleet. payroll represent We compensation rationalization expense. during XX% $X due offset increase expenses, this of the utilization of vehicle points sequential revenue XXX revenues non-cash the to was down rental product was payroll-related expect SG&A during field labor which expenses, lower despite

expect $X and million under in XXXX compensation We We $X QX over flat with million QX between severance in SG&A stock-based recorded to be expense just expense million. slightly XXXX. at $X million $X of

the Second from quarter million, Adjustments $X million the quarter. was of Depreciation $XX $XX $XX.X included during compensation. during million million XXXX of first revenues. in Adjusted EBITDA down quarter $XX from during EBITDA during the second represented expenses in was stock-based adjusted quarter the quarter. expense the million and XX% XXX,XXX down severance for period first

income $X.X stable or no Class XX% of relatively an the was percentage. XXXX. to remain that income ownership million share in assuming A earnings end estimate QX public tax in was and GAAP in rate per which net XX%. public at at EPS $X.XX XX% rate tax XX per should prefer look changes ownership and XXXX. the result adjusted to and approximately QX in X.X the XXXX, compared at QX net quarter. Internally was in effective $X.XX This We respectively we adjusted million QX in were will our and share of Our for

of the resulting September approved share $X.XX to of per has dividend $X.X associated quarter payments. we our net paid million this share. a quarterly dividend also of paid per and $X.XX of The distribution year Board During second dividend be the from out in

the million generation cash almost $XX company. Our cash during an the June to impressive million increased the quarter $XXX at position flow highlighting XX, free by of strong

cash For flow the spend operating CapEx million. was was net $X.X our and $XX.X million quarter,

quarter distribution $X recognized this release revenue remains tariff of in inventory during associated with additional in second as $X.X the granted quarter. substantially received $X.X Cactus to values The associated million allocated March disclosed our recognized These in over refunds a of Early exclusions costs. be made refunds The our by third tax in product as reduced million during of million we quarter of reduction refunds million. cost cost if approximately As TRA in year. when and the sold the $X million recorded will goods potential $XX by to not amount with yet annual the of payment XX. and and June

net the modest CapEx The We as in strong it million. directly $XX evidenced million I'll now and business capital remain results requirements payment the and for associated Scott. covers savings such review to $XX by disbursements guidance be turn distribution reducing financial and XXXX back this our us tax for liability. our and between lower as That to from expect XXXX our substantially imputed XXXX recent vary be reflects associated structure. tax with corporate to The payment the arising

Scott Bender

requirements. XXXX was Okay. CapEx charges to made XXXX. Thanks, highlighted of as have May validated an XXXX levels. our savings $X annualized The quarter variable key annualized two midpoint reduced million of the reduce half second requiring achieved in during end success the less Steve. through its associated expenses guidance by that during This been below on than We've of reductions and $XX its and the million cost the million XX% severance cash often first payroll-related by total $XX basis the Cactus' was factors nature we payroll modest in capital approximately cost in

quarter the favorable are market news mentioned, is year goods the we'll our additional second allowing through USTR on quarter. costs during our Looking exclusions amount a well impact for we throughout communicated product our regards us so over the as portend as we've favorable of share, that line financial supply the to in of This are little given the refunds receive Steve coming further and applied for timing granted though position in largely out. support response. we're to the and May declines manufacture granted $X August profit specific final in receive currently with we With These if uncertain. incrementals customer our April expectations previously on to Such leverage extensions products awaiting And to a and magnitude specific that produced margins. run strong our internationally. played the optimistic chain. out profile. we future business, the million exclusions Notwithstanding volatility of looking gross should this a and foregoing, week-to-week believe for quarters This set remains extensions lower currently

emerge our and market acquired June both Now that signs stabilization, confident we'll levels of that than share we're from customers. pre-downturn exhibiting share market higher high during recently XXXX long-term you count with is our the and an supported rig mid-July all-time indications and positive of half by of second the both reaching

customers concessions scarce become witnessed untenable. cannot service further prior efficiency pricing downturns during afford as gains ignore As and to

than to followed the down We in financial approximately the From reduction current onshore percentage the our rigs level with range -- revenues market. of QX the in relatively range currently sequentially activity in count is quarter Assuming rig be modest less margins product related XX%. outperforming will increases XX% rig the near-term down from our of count flat sequentially. one-third be perspective and some followed third Cactus' levels a expect production in production EBITDA with in during the the rigs the average QX be broader to slightly U.S.

completion to On degree ability of as to given ceased operator market. business, the a second revenues the move similar activity declined activity the as barrels onshore quarter to rental side limited during

pricing levels desperation mirrored in XXXX. witnessed addition, early In

to bring equipment the We to ability our business continue services the maintain margins opportunities, below to key recognizing maintain discipline to just This our and XX% customers. was quarter. evaluating second value during discipline of EBITDA and

double-digit given the in the point Looking with expect XX% declines revenue low to range. we margins quarter-over-quarter starting QX, lower

product total activity quarter. mid margins and for the segment service the record our quarter. see field range continue were adjusted pleased very We by in in driven this margins rental revenues coming expect and EBITDA XX% nearly to of during to Regarding both to be XX% the EBITDA

we costs. will recall, similar our XX% despite you EBITDA we able we margins were prior results adjusted above maintain and public private company during believe downturn, to If while the achieve

million we've impeded I'd into few a below we our as will of the have million to before XXXX. close in As guidance momentum. to least $XX of develop our the reduced we travel fruit $XX levels line items continue noted CapEx XXXX opening annualized continued viable by XXXX surprisingly million to expand for opportunities for believe activity. Internationally, to given XXXX expected questions. highlighting of bear like of half foresee however, our outside to at Not spending business target restrictions levels U.S. into $XX to back We earlier the markets and strategy

industry to consolidation we M&A, where believe the most sense. Regarding our tangible we continue within to visibility have the makes synergies

with Regarding oil through service field capital industry's companies emerge set in in our ability to as level dividend we dividend mind. the maintained confident, flex who We cyclicality allocation few downturn. costs will our remain level of we our one this our

this in our and investors As long-term highly aligned business with I regularly remind you management are shareholders.

the And navigate is generating been challenging levels Given back XX% our activity we summary, last reduction Q&A. the success well-positioned since year more in with this begin has to market important. to environment. never continued almost may so returns Cactus in I'll over Operator? operator that turn it cash In

Operator

first JPMorgan. line comes Instruction] question from [Operator Your you. the Meakim Sean Thank from of

Sean Meakim

Thank you. good Hey, morning.

Scott Bender

you? are How

Sean Meakim

Scott, right. done you. I'm great. the you're Thank Well and quarter managing doing on

going highlights China caveats the the of revelation to in differentiated but and your some to nature blended the from COGS said in margins as If the goods really love variable Just hear XX% on of XX% costs constructive tariff something your tariff costs XX%. are sector cost sold like maybe just that. that past elaboration impact is highly down, would to on it's some the is attempt assuming I'm half going give for of to forward. quite the you me of those you maybe and

Scott Bender

now. it Okay. on Steve, you

Steve Bender

correct everything of the is Yes, you as kind last I think, part. said of

-- weren't a First these on on our of What number were products. of of all, products. significant but our they exclusions all

XX% would what X% on impact impact mentioned. full China got margins absolute the is at at impact you in on you caveats So because in the quarter a factor been basis product something for March have we did look all other of coming so you like the and you've quarter's it once that as kind happen from the an looking margin probably

obviously I in mentioned Scott in to phone the think suffers important environment working roll I think, Joel hard everybody and and call suppliers things something downhill. on this is is very tend

inventory confident there the benefits regardless get able and some to feel concessions tariff our of we've 'XXs be so to the the been pretty margins. will extension we these roll and through able we So of system outcome, that range as cost maintain in on something product they that in low take

Sean Meakim

there like helpful. really And The it some is share, is market Got then clarification it. on volatility. Yes. sounds

Just given came and the in today share. of you the are by stand you then where of terms unprecedented market encouraged sound speed out at getting dropped you quarter but which how rigs pretty

So about last the you're those share? in looking talk the is market executing of puts to takes forward of just a some similar and Can downturn. playbook implication what you and terms

Scott Bender

question market Yes, well such very team feel though. could answer Sean. confident. directly. you, This I Yes I feels I can your a volatile I wish very is confident, tell the

you're have think know mean increased large -- leave Part volatility of problem large now that I to we is I'm really at you're in the had by to customers going the with this you the as record very downturn want that we've and year. degree going see as as confident into work. some customers they well end of beginning of rapidly the a customers high-profile to to returning share I market to market that. to very I this see see share. it That at rig some company the we're rigs new dropped adding And which subsided those benefits month-to-month our of has volatility counts. went extremely that

think customers the the financed adoption our responsible industry most going have financially So up. I rate is in And customers. best we the

wish, So confident. I I can't. I give yes you I feel know more you detail but very could

Sean Meakim

Understood. Thanks a lot.

Operator

the Ian Simmons. MacPherson next question from of comes line Your of

Your line is open.

Ian MacPherson

-- this but and from just in the is I call forward with seen briefly make given incurred the quarter's the market --anything issue a of that, the Scott, plate of over redefinition what better bolt-ons could to landscape last not accretive. the just the hot U.S. in morning conceptually. congrats opportunity Looking good Thanks and and of logical course obviously you M&A the of for types was we've sense dimensions -- sense curious stabilization you, market extensions on some year? it have regards of Cactus a U.S. that that front mentioned it or what of M&A quarter. the that are?

Scott Bender

So right.

be now. me right clear Let

have We opportunities have are more own now know And cautious believe sound are to better it's that think opportunities of will in There of else It's see who understand best else this synergy a than surprises fact makes for we announcements, M&A. more because business. public own that best is team, nature I of I surfacing. think I it nothing that within this in opportunities, place terms experience that like want reason. the lot we industry our anybody and on appear the industry. think we in there're We know, I horizon M&A somebody are like clearly to benefits. but But I the whereas true the look the business we that we we our M&A there mentioned, within tangible

Ian MacPherson

U.S. entail than broader onshore potentially? or that Does focus anything that

Scott Bender

related to just see frankly would to be wellheads. I We say both. it stockholds now want quite and

Ian MacPherson

Thanks it. Understood. it Appreciate pass much. very will over. I

Operator

from TPH George line of Next & question O'Leary Company. from the comes

Your line is open.

Scott Bender

you Hey George. doing? How are

George O'Leary

I morning are well. doing Good you? How am guys.

Scott Bender

I great. am Thanks. doing

George O'Leary

percentage frame revenues bottom? older rental last curious, you if and rolled Has just the this of we've percentage of there bounce generation and is of can exact if start if are you the out mix shifted that progressed any period off frame numbers? through soft kind -- the you curious, your technology could are to technologies newer that and year what Just what as

Scott Bender

face said collectively to percentage unable that that a technologies certainly have about of year Right increase. this we've XX% I the think it's that are that the number optimistic completion money part same And feels most, the a extremely this and in our George. for group that really cut completing reason total XXXX rate that wells going who result, now their appreciated up. activity. on to that that headwinds the group we adoption to latter customers and that in will good start ultimately the move our back is revenue that's been Having That that the of I'm as as

George O'Leary

helpful. Scott. already July and you, a is from more very at And market just interesting Thank me you then share record. Very said one

a taking July feasible was? question, by think or end by you the asked year a at previously of And is for followed stab -- the that of that level could kind what what of market frame So then what in rigs the targeting you're share the does July is end of the you apologies year?

Scott Bender

means at I percentage have sort I I broadly it speaking, record. the that know tell what a you nice George. purposely had try can you you of look tell didn't that but you guess we a was, what I'd what chart

year. the that about we that. by I end additionally up feel that from the of can record I good think move

George O'Leary

Thank was shot. case you. I dig a but Figure that

Scott Bender

right, sorry George. All

Operator

Okay.

of Your next Moll the line question Tommy comes from from Stephens.

is Your open. line

Scott Bender

Tommy. Hey

Tommy Moll

taking thanks Good Scott. morning my And for questions.

Scott Bender

you are How doing?

Tommy Moll

Good. Fine, you. thank

today, on about of you which chain I And out interruptions there much -- So related level wonder we to helpful? would haven't of the point, your for the for priority willing us supply to future, be give could Asia be China? alternative if that coming talked then supply you'd product update sources the but on an update the any maybe any level And commented share extent you've before. in on a

Scott Bender

supply but about Yes you focus we're chain want can the as increased I'll moving that we I last to out of with Joel you I call, but discussed talk China, that in tell on China. let talk area, about diversifying think Joel our

Joel Bender

there lots returned not right really issues has -- any China, capacity the capacity China I'm distribution with now. to of production. that is suppliers of base seeing really kind and there

issue only now think to availability. the relates we it's vessel I just right see that

it production deliver be than they you other take sort before point it in to terms think production of weeks for that, fruit and our weeks to going it just of now focus terms did two we you locations for I different the are see actively load might typically working it in between to So some that, right now in in produce some that been in, week would the year. in port get may and no product, you it product now. to you'll couple same of there. but right the again, of but And to Scott take there's of now as then end two of from us on XXXX. options used longer A alternate the get because and said, use Lots good that disruption is

Tommy Moll

that you initiatives. shifting Thank cost helpful save on both is topic context thanks. and Great different now all to your

You opportunities took think indicated $XX all as nature million about have as underscores structure. already or incrementals think the again, about we take earlier the through of way recovery. -- on or recovery, and have seen your your gone you potential fixed Maybe cost But out the as million we on that things this up you didn't you for little $XX which variable bit implications we annualized out cost pretty I'm getting a quickly, of here. variable of should ahead a positive variable having Scott well, have as opportunities to moved process back cost which

Scott Bender

Okay, that to I'm answer parts. in two going question

add XX answer. we the The took up first that's we return not have to to of out pre-COVID, part and we the XX first if would is down going going

hope we've Even related, to $XX first include I that so attacked does vengeance, related Okay. that the costs that answer was that non-payroll though part. million so payroll with not

organization have We in second it's The business. a whole the have of fixed don't I see. fact think layers don't lot multiple in just do about this to management fixed costs costs. you'll part of flattest with We has is

not we result fixed duration point so we've the think the invested our reduce. that we go not and it's to I in In I many I'm -- not never there's different to reduce put that at write-downs, to. large you to but years, fixed a ourselves to be off there not just in certainly platform and managing lot fixed cost three Taking be write-downs, will going need guess those, attacked to costs average a going example, script should unusual. take that us little need to a our We for they're is I well, to already, have cost so way. off, flexibility facility never for of - we are But us think facilities, your a in your I which long-term I'm is a is some We as the going opportunities terms at have regard, of reduce cost. to position terms in of lease look of neighborhood in write-downs,

Tommy Moll

helpful Very fulsome we schedule fixed a maybe cost. more in a will on write-downs and for discussion podcast Scott

Scott Bender

that podcast? beyond are You

Tommy Moll

love lead it Thank turn to I'll I'd back. it. you.

Operator

Your next the question Suisse. of Jacob comes from line Credit from Lundberg

is open. line Your

Jacob Lundberg

Hey, good morning guys.

Scott Bender

morning. Good

Jacob Lundberg

kind those from way the you've go But appetite changes in but to about innovative Just temporarily and efficiencies. new on any I'm your as in customers customer there took that of downturn immediate are the the the thinking of your the with coming thinking be way specifically of relates change any are back in discussion some business application understand this those your negative if some about rental I'm XQ. stuff products, wanted within thinking in obviously broadly just about, to thinking for towards some your in to seen of goes the so could driving of focus out think it business, like you terms cash as segment. the of technologies innovations greater customers their curious of I down better operators preservation numbers during conversations kind mix

Scott Bender

about couple back Yes, larger the seeing Yes. and the of are interest renewed our during work, any on innovation going I'd say we're we two, a enough quarter. weeks as fleet. of to side our appetite part three additional saw Interestingly during to beginning the of very over for frac little rental accounts talk cost some -- last,

as it's great. that value have significance means down the that costs of not quite is lot, a course which of item gone stage other of is reducing The NPT

best less so extremely the today's that and which up environment And probably and like happens becomes on slightly in so mix payback the was naturally pricing supports thing move compelling us always innovation. the industry frankly -- pumping safety we've begins and environment, thought customer just stabilizes pressure innovation, for an to high an the

So I just money. spending much this though interest there about feel no future quarter better the was in

Jacob Lundberg

makes on line a kind of just of was guess, top completion flat you activity I And curious bit in but of rental have little That on I just XQ the modestly curious expected sense. could maybe up, then of with Okay. a guidance what on been I completions. again XQ. in question, XQ guys the would rebound segments. have revenues would to me understand view kind help if disconnect, a maybe I different you seems have like it perhaps

Scott Bender

last I Scott A of think then - good. of XX Fair part the quarter answer most was we're first Bender deteriorated the pretty conservative. And honest Probably the in Okay. it is months. the enough. couple

Scott Bender

some A Thanks think upside. Scott is it Bender Makes - sense. I XX Appreciate there a lot. guys.

Scott Bender

Okay.

Operator

Morgan Your of Connor comes from next the from Lynagh question Stanley. line

now is open. line Your

Connor Lynagh

Thanks. Yes.

Scott Bender

doing? you are how Connor,

Connor Lynagh

How you doing? Good. are

Scott Bender

Great.

Connor Lynagh

side where things, up if question heading. wondering of follow on more think I gave assessments the you of there could quarter one rig last on Jack's things was were I I more the realistic guys

on a little addressed side bit highlighted things visibility the I to have you I other you drilling contractors. think than you've there, completions but some of guys think more of get the

work some early think back you are later appetite what's to So rigs to this do XXXX days? at people's on where or your the these year put thinking customers

Scott Bender

any gas not optimism prices see that may appetite of Northeast Bakken, Ford, Texas I be an appetite of in a waning see say South indication in Northeast. increased We see be it the or of sort the that Delaware. in in the sort hoped the bit I the but so believe on Delaware, much in a no I had I'd and would Mid-Con seeing the Eagle I little primarily see constructive really that of appetite would on appetite the

Connor Lynagh

sort Got there? of single-digits for talking we're of order mean year. double-digits, as thinking sense. you move we're low your sort what magnitude think have That we makes I about it. Any later talking of this us

Scott Bender

I say year. low of the would by the double-digits probably end

Connor Lynagh

Got I it. go to ahead Right maybe sorry. pivot wanted --

Scott Bender

customer-by-customer customers said rigs fair think of that but caveat to capable my really some I say blessed earlier about of think that the we're that off think some double-digits. to think top some are financially them I it's of really are head aren't just What Let of me that them saying by adding will I'm I I trying low is happen. and with

this question, but didn't answer to it I'm going You ask anyway.

is activity. in Our XX% of business of fell the range which tree historically completion or production off of the the face because products so XX% range really map

You're from our and there activity up segment. production light seeing going general act. much to some better think see already frac production in We're results see tree picks as I you'll

Our faster pick disproportionately than our up wellhead production tree product segment.

Connor Lynagh

early the a another be, downturn. the to as a and the your clear they past we've ask. I there returns. a gone is kind here, XX in question kind have share any serious mean of about think even higher are it. the of some seen better it's These or XX there it something into And many players one cutting is for to Got larger That's to behavior to months here of returns competitors. lot I opportunities round didn't I but lot shift used generate lower of a stock too you of taken those question probably The have large part where level more organizations I that had you lot to tell. I mandate that than of of you've have some is do had you've cost done

Scott Bender

of with The their love a as short behavior. of my much lot any competitors answer other all think much is about how change want really them. competitors seen business. don't disparaging wellhead move needle a our in know surface to haven't really the I I You their have remarks they take I probably I indication This problems business any besides doesn't

Connor Lynagh

Thanks. fair. That's

Operator

RBC. question Speakers of Kurt from comes of Hallead your next line the

Your is open. line

Kurt Hallead

good everybody. Hey morning

Scott Bender

Good morning.

Kurt Hallead

Hey Scott.

combination to of can wanted Texas and that when prospect activity in both. you clarify with if or activity I specific drilling South the increased Delaware see clarify Just some activity completion the of to one or thing talked about

Scott Bender

I Yes, was I responded but about was -- I talk only drilling. thinking was really I have

Kurt Hallead

pickup appreciate of see I be In how you your of us of activity, a activity that great. can sustainability the the you into dynamic may the a going fourth little related for seems Okay, of of here kind quarter. like context evolving on a to getting read it and in the then things prospects there's quarter third completion I'm give on that. perspective mixed bit

a appreciate to dynamics comfort really zone beyond close you're little quarter-to-quarter perspective. your about know pushing I maybe in So, bit customer would tied really so your but base

Scott Bender

our activity that view other regard. basin good think West a than will greater to visibility XX I be don't any is completion improvement the far days a that I and in that in in have degree beyond Yes, really in the Texas next

know later adding So, to some of couple But our are talking crews. adding a going lot a going about sooner customers customers have they're they have that not the built be Having of continued our that we address or are those. of DUCs crews. said to to

you're from of not though. QX going going about but in I'm to than a industry they level in that the probably as optimistic good that think I is that I probably feel XXXX DUCs to a QX Maybe to large have increase maintain past the higher see pretty regard.

Kurt Hallead

to color There us driving of Okay, or And is gains the from wonder then on be technology can give new a been I if business. least efficiency is share think as ultimately the curious any that's market more have developments what for will my to you think wellhead a side developments you share read recent elements as if driving from that you improved perspective, the of or dynamic. little refresh on what at great color. to you get or

Scott Bender

combination a I it's rigs. right mix, of customers, customers adding Yes, the customer think

it, level our outside so I than execution capable think also better it's has for made -- everybody execution group field is operating we my the suffer but you were opinion and core anybody decision. of so people I that appreciate business hard service to to today. has Because branch our and of it been never of in financially maintaining outstanding think the cuts not we back. it's It's as levels to service and it's going surprise learn

so begin maybe our perhaps aspect as to competitors the less pay to of that business. And attention

the seeing of benefits we're that. think I

Kurt Hallead

for if I one Okay, I Steven. that. may slip And appreciate in

Just margin back half the on products exclusive be in business the tariff of in wanted also of terms to for of low XX% refunds that this margins year. would clarify the the any

Steve Tadlock

Yes.

Scott Bender

Yes.

Kurt Hallead

clarifying. for Thanks. you Thank Okay.

Operator

Your next Wolfe from comes Research. of from line the Gendron Blake question

Your open. line is

Blake Gendron

Thanks Hey thanks. morning. Good questions for here. taking my

on the products revenue revenue first products so underperformed followed I still The like improved the products, pricing wouldn't it cliff, so count trees increased the on off and average. fell quarter-over-quarter quarter, in rig a slightly. per rig assume but sounds

this rigs the where drilling thing more that a about the rig efficiency forward? an moving a see were for left just you fully it far lower is we And that think continuing in appreciated is business not were this wells. trend count So way be may growth

Scott Bender

rigs is and delay there added Blake, between a revenue Well realized.

Okay.

went into the and think very, that the very high of saw quarter. I So we rig benefit during count downturn with a the you

point. As I That's because said of lag. the one

that cost in -- average up the or favorable has this in wellhead it's in product the off mix I expensive Bakken think more a South more fell the next good point areas our become lowest wellhead Delaware with and the is the for the like and in best example Texas. than the areas held the most Delaware the is deal

So as combination between generated. as it's being being said lag I and well of revenue rigs mix the time a product added

Blake Gendron

But a what gears think of optimal And about you I ideal the to a internationally? business structure strategy some would about of because with familiar like here. you're if the fair. is? move international just have part forward sort of more the I of in that commercial nail we accretion trying expansion basically to up partner obviously go margin guess appreciate when comments commercial about and the be world. specifically Middle eventually we to see some to we through I look East to that get know how it's international. were your down here little tough low. expansion anticipate traction own you cost U.S. roughly right think businesses What stance do operation world, as constraints then you you a fixed overhead you I'm to time the this understand keeping as bit try would now in back logistical today the Totally just how stand part to your prior your and very versus in getting that investors one guess Shifting is

Scott Bender

do of to is and which of little so say we others distributed will my I in of have to the line think would outside a our little a but to going control. technology going I'm thing on me a I whims Well the the concern, response. bit two, our you're bit I that subject might going to, competitors of some always never combination gives I'm to not to one see vague to have be

it So so to control control a we no facility, be partnership. or it can standout matter the what adopt going be maintain a technology. we a JV We're structure

In I've internationally. a view. competitors fact said some margins our is take experience times that before it's larger a I different that terms many know are of just internationally. lower My margins, as margins of

because industry up think this last doesn't to a I booked Margins well going simply were is appreciate maybe oriented international the that and beating the year. year are orders while that held it's in the XXXX. project internationally take extremely fact

that. continue nonetheless XXXX As see purchases, I are we margins than like had so and NOCs what going we but going to going We're their the negotiate worse anticipated, be results pursue course. still are particularly, XXXX even to some to the this feel staying to of you're

That's some only which attention than had just the So long all service just general its maybe to obviously people you I that's not it. still disclosed anticipated lines. worse we're internationally competition and company turning worse increase margins have to than is going

Blake Gendron

Is than lower that lower U.S. -- margin that's the business. Totally fair.

history? than Just recent just in has to be or clear lower international been

Scott Bender

has the in lower been. U.S. than Lower it

Blake Gendron

one relates Got think to in the quick follow-up, gas yet East? opportunity Middle unconventional any side just And it scale it you the as products you. on have not is or just rental your

Scott Bender

is there opportunity there. Yes,

Blake Gendron

Great. much. Thank very you

Operator

of line of Your comes Mr. the Gengaro next question Stifel. from

Your line is open.

Stephen Gengaro

gentlemen. morning, Good Thanks.

going for market Just function is two? new a or share a gains those about forward existing talk me. customers, a combination of follow-up it When customers you quick of by more work

Scott Bender

Combination.

Stephen Gengaro

any one might capital and or second based the you year, on Okay. Thanks. on working And guidance dynamics follow-up the front then of payables half working at benefit either look we from get as the capital of in the just DSOs aggregate? other the

Steve Tadlock

quarter left say the expect in terms would some inventory certainly a harvesting in on some, to in of some. we would and great side but collections Sure. we days obviously AR Yes, had AR see we I think continue we'll

I with picture, TRA remainder think will the account cash at balance through cash overall free positive the remain the year roughly paying of we the the after and think flow flat payment. dividends we looking into recent taking on

Stephen Gengaro

Great. Thank you.

Scott Bender

Yes.

that to This the payment a add me Let done mean impact to I'm on very team and I really little AR, just that going from with didn't problems. remarkable optimistic this thing question. has you even job from though we're ask emerge customer very

Stephen Gengaro

you. Thank Okay.

Operator

comes Your from of from line question of next Mulvehill Bank the America. Chase

Your open. line is

Chase Mulvehill

Hey. Good morning, gentlemen.

Scott Bender

Chase? How are you,

Chase Mulvehill

in window I’m well. It’s look so to But… ring. doing sunny sun Houston, some and finally rising it’s nice here off the see

Scott Bender

[Indiscernible]

Chase Mulvehill

Houston, It’s right. No.

Scott Bender

Yeah, exactly.

Chase Mulvehill

that confirm I'm count comment for success If third the what gains. rigs majors actually then rig hear down has expectations number, question This yet. and the I for penetrating guess, of XX%. about implies share that XX% about in probably come the to you the market Can followed if had been lot, math the and on you've doing calculation a share your the wanted I I the doing are share right but and kind XQ back that industry, you'd maybe around to have asked guess the didn't quarter. also I

Scott Bender

question a got buddy, about think so fair let you're say that. me I pretty share. Certainly market that's good I've mathematician just

going drilling say ability And wells drill think customers asked the the with about to second you really year of the next the half whom are on business question majors. next to people be I'm financially. in I do we about that wells comment feel good except The the about their and and not year. Okay. to that going the to to

Chase Mulvehill

Okay, all a right. I'll yes. take that as

Scott Bender

No, Chase say didn't yes. I

Chase Mulvehill

$XX half an no. kind of been Maintenance, talk and below million covered think You here, other a longer-term guess is of but CapEx. basis. just said you've I right. wanted kind All about of CapEx on didn't to mostly back Obviously lot maintenance. say I is the have annual things

as and As spend of we building look of over years How growth next you need that should much CapEx? push over to internationally? moving do internationally. How think think you the the pieces next you about for we the you about years think out couple couple

Scott Bender

going it's money, you wish be. I we’ve not I God, to could tell immense got of

a very before, yourself to concern this CapEx. conservative, I've not in do just with the that's to manner the think do call operate. in a We're we that's international because going last it going be I call said way the or

us announce in facility that You're million a see someplace Kazakhstan to or not going anywhere. or like $XX

just We're going not to that. Okay? do

Chase Mulvehill

I Okay. kind term, And bumps then growth rental need probably next you -- rental? anything spend mean, the in foresee Do but the any you is there of of big I don't years. the near couple for in side imagine anytime on to over

Scott Bender

very of not intend it's but we Not not amount a discuss to legacy interesting I've we've we of that that going couple have the completion still introduced, of significant on to that. got be got introduce. going for side plenty to But, money. Obviously, equipment. products not I'm a

Chase Mulvehill

Okay. Understood.

Scott Bender

our $XX I will think to a sure. by would statement like CapEx be earlier But year. million be CapEx incremental XXXX I that looks it stand

Chase Mulvehill

Got it.

it Okay. I’ll the Appreciate turn back color. over.

Operator

Thank this you. Speakers, there are at time. no more questions

continue. You may

John Fitzgerald

everyone for call. joining Thanks the

Scott Bender

safe. stay of everybody we looking again can when get all together. Thanks well. to forward Kind everybody Stay seeing

Operator

and conference you Once speakers. gentlemen joining. you, Thank for again, this all call. concludes today's ladies Thank

may You now disconnect.

Cactus (WHD) 2 Aug 202020 Q2 Earnings call transcript