WHD - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cactus Q4 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. John Fitzgerald. Please go ahead, sir.

John Fitzgerald

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

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

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

Scott Bender

and in a quarter nearly to by XXXX. activity XX% and XXXX. year-end of flow the We the debt activity at able to to see with Cactus its margins We quarter, improve which by were ability XX% year ended were from the to cash. XXXX showcased share continued generating the bank good a portion year by pleased trend count market a year-over-year, a XX% million our adjusted fourth $XXX no of begin general in $XXX early during and everyone. EBITDA overall in of further John, morning Thanks, record Through of fourth growing We free rig to to down which offset the decline million. was U.S. XX% recording cash outperform

adjusted So in XX%. approximately summary, fourth $XX million, quarter revenues million, EBITDA were were adjusted about EBITDA was $XX just margins

cash to will Our quarterly paid over our before following lines to per dividend turn Steve CFO, call $XXX for we And provide million. our outlook share. balance his Tadlock, near-term a I'll financial the the the results. some who of on increased I'll Q&A. for review now remarks, thoughts opening Steve? And our $X.XX nearly

Steve Tadlock

of on quarter a declined revenue decrease to depreciable from from margins XX% revenues down $XXX,XXX relatively $XX slightly million, a $X fixed Thanks, down share XXXX. million under an QX Scott. margins up Rental Gross to $XX due negative higher In revenues and QX, prior during accelerated market of and XXX nearly of than points were of revenues the third the to ahead of to sequential approximately were basis quarter. basis revenues, QX. of nearly base, gross lower increase represented and followed. quarter impact XX% of QX million tariff primarily service the in up revenues the third rigs QX Product were versus million, Product by driven during in over declined sequentially, tariff mobilization refunds under over $XX quarter. Product which $X million were refunds, these basis by costs. other when $XX margins of X,XXX revenues just XX% in refunds. impact XX% points gross the due were million XX% the expectations. sequentially a rental-related XX% were on product Field This excluding and up combined

during quarter that down of to time line nonproductive payroll-related were primarily XXXX. less of to attributable usual management was the margin We rental careful expectations. was expenses accrual quarter, drop $X with the sequentially. season. the decline the XX% expect the in to points service increase $XXX,XXX to SG&A field higher and revenues, increased basis margins million The was approximately holiday fourth employee of be seasonal additions. revenue during thanks sequentially XX% The associated during revenue up than quarter, of XXX an product and Gross bonus occurs first during with

to the quarter fourth down quarter Adjustments in last the when quarter, of less QX, stock-based approximately included expense EBITDA equipment quarter from or We of during excluding than Fourth in from to the $XX during million period, was stock-based million third Depreciation rental XX% expect of of million additions from $XX XXXX, SG&A million, during less third tariff million. quarter compensation million than assets, lack $X.X down $X adjusted be expense due of $X slightly was of inclusive $X $XX service down $X and sequential million Adjusted fleet. for largely represented $X.X XXXX the sequentially, during of XX% adjusted our were down the EBITDA. XXX% revenues than to refunds more vehicle in third refunds. XX% quarter. million for revenues field the during EBITDA million the decline nearly the quarter Tariff accounting in revenues, of compensation.

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

quarterly we of dividend During outflow resulting in the fourth per share, cash a million. $X.XX a of $X quarter, paid

paid As Board March in publicly also has January, announced this to late year. of share of a in dividend be $X.XX the approved per

cash position the flow at beyond cash during Our $XXX year-end, dividend. of to free above quarter by our highlighting nearly current million the approximately and $XX generation the company million continued increased

flow growth continue quarter, for was million, operating $X remain net the requirements regards modest, with For to exercise CapEx. and our business cash our will discipline Capital $XX CapEx and was we million. to

to a As range XXXX $XX $XX review, million. such, covers million our I'll back is CapEx and the guidance for net it That of now Scott. turn to financial for

Scott Bender

that financial delivering impact in markets. demands first for of for reputation Southern market I'll call, our given achieved services on during and management this of changing excluding share company record on paralyzed that as products proved quarter, forthcoming. we We our the noted strong of last winter XXXX, were a our quarter our results. track On execution call, storms the market providing U.S. meet on accurate, innovative provide share storm's fourth customer the our Thanks, And of loyalty effect customer up our Steve. strong of record estimate our an the best update product certainly recent gains the that much the base, outlook, the conviction further of setting and well this XX% near-term current before

Cactus' customer first the approximately rigs XX% followed currently earlier, generate increase continues positive during XXXX. mentioned to As momentum, to reactivity by quarter of and expect we

we winter revenues basis. of the or Excluding aforementioned the to impact on more product storms, a XX% expect increase sequential

expected percentage margins Continued a caution. are strength freight provide first delays indicated reshipments quarter, the Product XX rising the for EBITDA ocean prices product outlook, the in have during but to this XXs may despite low percentage in to from steel low reason upside pressure slight weather-related - costs. and aforementioned remain

work accordingly compensate to been us of maintained our the business, services On provide. the our low-margin side equipment the for and customers position chase rental of and value we've reluctant that

chose to revenues declined As lower-cost work award suppliers. as during quarter to the such, customers

last that noted for we Year. start New certainly it the were case in higher-end regarding providers we to our been the and optimistic increased has demand However, XXXX, call on

on to sequential the more excluding expect impacts, a For quarter, revenue basis. weather-related again, rental up first than any be XX% we

we've our now Offering assets total in was on during these their that source the expect that nearly that the margins, we generated approximately amount the several the have to are customers XX% technologies equal redeployment EBITDA for reset. encouragement temporarily been of innovations fourth quarter As to be from January first from budgets Revenue of historically, seen weighs which quarter. revalidating

Regarding fuel service, rental revenues by to be driven in continue this and both segment product our activity.

quarter, impact at would provide At XXXX the front, believe We the East On shipment enabling product weather-related opening adjust on first market of diesel in $X by of during before Uncertainty shipment fully we've recovery million the $X over EBITDA remains our I'd clear, in in to source. figures externally the last restrictions technology able associates believe range the we need friendly see run platform with and previously. to several challenging generation over the more few be slowdown sourced the we which in with electric the regarding the power several to supervisors. initial equipment and revenue The quarter impact best will capable to is wages a of power establish to estimate by once still this more we've to and the impact as a proportional low revenue as typically with appropriately be close reflect achieved witnessed promoting sales travel To and relationships We made environmentally element associated years. in reducing the customers been converting by witnessed questions. lost but well first operation. days. the early to - from highlighting however, further and of for working this site, to down can further exclude mentioned million as XXXX. last during we storms rental players few - required to our supported expect we've We equipment well, million a revenue-related provide slowdown. during initiative of more than some concern higher of present, to for range into during the the total remains a $X generate the February. in now activity, first the for sequentially revenue the this through likely Mid costs EBITDA of generated region to ease, items the the the new be range $X internally this that potential but more Cactus remobilize, encouraged fixed our is speed million, will thereby mid-XX% in Internationally, event. our or our we're the a margins like to period line guidance completion provided be growth been be Utilization, maintain and to reasons of which

Given friendly quest figures to have a relationships many largest our as operators the with our in and E&P traditionally for well gains, more viewed the environmentally of customers close efficiency key ability site. drive us

our new whom a against providers often our us As differentiator and a share safer, remind the a some ESG to I'll important our of enable largest technologies from result, carefully. will beginning gain offering view operations clients some we're and expansion their and in new believe manner. technologies customers compete. Cactus lower-priced as conducting we developing as and this these aiding with most as development our an partner, investors, faster the We international of of cleaner

year $XX evidenced our budget capital As net million XXXX by of $XX to full million.

free evaluate capital hope upward cash We justifying to deployment will with current will spending. continue flow improve expectations, and beyond as conditions priorities. frankly revision our returns modest a in team that main Our

outstanding success, remiss their associates excellence of industry In be sacrifices. our M&A, activity the last from particularly synergies. to our our for have within are and presents we I'd favorable in to light take been that this the attention optimistic believe scope opportunities significant summary, makes consolidation sense ready about of execution the responsible commitment acknowledging performance continue to advantage for upcoming in year. their the to positioning. tangible in for Their we most safety our to financial that remain recovery Regarding and directly not

it XXXX recognition Our to same in wage we begin back optimism was reflects over Q&A. our environment. and of reductions regarding the the can turn the Operator? operator, and increasing partial rollback the I'll macro With of that,

Operator

the with George question first from TPH Your of Instructions] & line [Operator O'Leary Company. comes

George O'Leary

Good morning guys.

Scott Bender

Good morning, George.

Steve Tadlock

morning. Good

George O'Leary

XX% just want heard the quarter-over-quarter? number I one, make I or Did quick sure guidance say Super up rental right. XX% to up you

Scott Bender

Five zero.

George O'Leary

thoughtful a I a okay. question. technology of are zero, When particular, in heard Great little Five reducing that sure get make is skis working in more reducing the emissions, a to bit emissions, Want you, you focus. And about on over then that methane and right to clarification. new the my you thanks not clear for number guys offerings, model. spoke

You and with saying. in collaborate quote guys them? investors. of opportunity, identifying process that Cactus much customers Hey, always emissions with I often how type an coming how your collaborate need working to - much lower customers your or ESG we was that E&P to of throughout wonder you to and was and

process was the impetus the for that what going way that front? what Just was like technology and on

Scott Bender

George. Yes,

unlike way providing we if up heads, of try with So determine was our sort generators. came is the generators location many concept. better significantly looked of most of not Cactus think better of to our and on issues this scratch But We we was maintenance power. number resulting how a the innovations, with way. only really and are generators there not what at And a a

George O'Leary

Okay, over. it Thanks answering I'll for questions. my back great. turn

Operator

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

Tommy Moll

morning, and my thanks taking for Good questions.

Scott Bender

How you? Good morning, Tommy. are

Tommy Moll

great, us et on majors, in cetera? customer can you've Doing sometimes of drive this just the might trends dynamics quarter you or record. what given that record the independents, privates, fourth share year? among Congrats that Scott, market on the thanks. in context some the trends like part the there vary look of that different Any first into past, some with the give insight us

Scott Bender

we revenue increase derived Yes, of Tommy, was I that saw private XX% percentage that from think XX%. the around from our

they the continue rigs add added XXXX. you as the few and to last in quite So quarter, private of the in beginning a rigs know,

increase some really beginning but substantial as to what a basis, we've privates. maybe But - a from see seen So substantial has now pretty been we're positive. percentage substantial a not on

from points E&Ps. data think our traded of large I some publicly

So will the level pretty a followed between those number of that of rigs to two, confidence increase. I high continue have

Tommy Moll

to cost at one forward think pressures point abate, there? don't couple Shifting you impacts as over freight be to called we taken and then And the inflation, into the this which if marketplace? I well. item year, mitigate as mitigate you've should wanted how quarters? already steel ask gears they some try measures to to Or out as to we what difficult look might about next those there that in is more the

Scott Bender

Yes.

So understand think I'm to let it's gains that with because I tie me important that in you - going market it. share

a obviously exhibit we increase willing who market what we look price. our customers we As reasonable share, to to pay loyalty and is think are

so, with a leaves And also those we to be with we'll recovery. cost relationship achieve have able some that customers us some confidence - that get

the So Far that freight particularly I increases think price that seeing. we're that, increases seeing, East, the steel we're ocean in the

I I've who and able the market, market We clearly, the our to on about ability. value has those customers. this don't pricing execution think We negotiations seen. will with place products market When worst some with in this ever offset customers with and been be share chase don't

over customers share we be the just on of contract say not discriminating of we're terms on limitation to we The - - think, had on compete note, lost. guess, chase. how in to market going major in there's much not price. that price I to no we're sort our market a with last lower that is chase. really we terms And want. we've share customers limit every last time we've As six the We're to of the a I the side going in months, That's

Tommy Moll

back. helpful very All and I you turn will Thank Scott. it

Operator

of Our the Gruber next from question with Citigroup. Scott comes line

Scott Gruber

good morning. Yes,

Scott Bender

Good are you? morning, Scott. How

Scott Gruber

I saw, something of which the of further the last obviously, and starts were still XQ a and close if that was on in rental between just compare the on side. XQ? you your to public the trajectories. pumpers pumpers a revenues see very here kind pre-pandemic, versus to public the follow. revenues disciplined year pumpers. created the guys outlook that versus that now your running of gap revenue balance pricing didn't outlook lot Question And comparing are below Obviously, the well. late But I we Doing

technology So able in above-market many for how are do in customers your pay you're willing be to going quality, to introductions, new a efficiency pay quarters just for to and rental? rate curious sustain that an you to now willing think row growth

Scott Bender

business I much completions Scott dynamics our benefit. the - based reluctance optimistic in maybe I to QX. upon we to the highest as chase pretty such in have Well, have predicted, as base, all segments. offers, think work. I'm low to our really from a of as trajectory business started that our growth beyond But I changed don't of speculate the want

and was the it the of we competitive. draconian lower-tier be the quarter, were and of decline think providers quality for. in of self-inflicted. we that struggling, lot terms after price us resources the back terms cut that was We're We more. are delivery cuts of because made both that our our looking add was add the going saw rental sort some locations. in when very I equipment revenue a back, going there and we the We team very, to that in And And in of very, signal some the quarter of to that we very knew to more frac first cut area, than resources fourth guess, suffer as frac anybody else, add was just field history I that we people is tells in continuing plant to support both terms began, in opportunity.

feel that I about don't second necessarily I the quarter, XX%. know yes, another good would So but say I

Scott Gruber

be would some pass-through, or XX easier opportunity seem would like some then too? partial through just XX, at lot your It XX great, full on commentary, on color a be be ability that pass-through. the up to following and a here it to of but does And an pass customers, the year. inflation color a that you. like there's rest PIs there Got whether for the Seems

Scott Bender

happens So eager oil they're customer pay I higher to very price, think no right. prices, you're pay likes price. what to lower a matter but No ever to a

I things are going think benefit. to two work that our in

the customer first loyalty The base. of our is

execute. ability customer company these I they costs. think the values, they our to with know to And base from work value rising I protect to our going do, us they're

important pricing. really we're I opportunity in thing, least, comes And see believe the it the to going tightening up a an the factor an market. in the second to with think improve at that is I market and tightening is,

So, I factors increased offset that give able me we'll than think to the be those confidence are more the two costs. that

Scott Gruber

Got color the it. you. Appreciate Scott. Thank

Operator

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

Blake Gendron

Yes to hey, XXXX thanks. maybe Good commentary. that to customer, the April market even March, have share new bottom the off quantify qualitatively, follow-up of of that I on wanted in can market or there for morning. any the us, of way growth the number say, Is versus share split? contributed kind customers you existing

Scott Bender

- it's Well, John, thinking on I I think I'm no have do. you data - that more than

have mean - gut I think I I feeling. a

John Fitzgerald

would that one adding And of this rigs. part or recovery, the year who in speaking, seeing - saw I just some of existing adding were then we a kind what are new the you fourth the broadly rigs big off saw privates as early additional bottom, two smaller the rigs. right operating kind customers increases chunk and characterize of it, back of were is quarter early

Blake Gendron

existing more to few prices mentioned. as sense. add stabilize, you if the then Got that presumably, get a rigs, customers it, oil okay And makes you

behind the is like refund impact tariff to sounds of you, so in some some profitability, questions. mentioned it inflation, Moving as other cost now the

if idea don't this rough I'm materials and some the given product mind. incremental maybe margins roll of can a across in and service, of margins you wondering of rental all if and incremental past? your together we You've just just in frame

roll all Just and of can these up? so puts understand takes we how kind

Scott Bender

Steve?

Steve Tadlock

adjusted give I'll to overall impacts. EBITDA incrementals that the numbers to lines. close weather of impact, excluding the - of impact. of you Obviously, tend margins But Scott excluding margins kind weather are general, Yes. what kind business we kind are by about talked our in see

some are rental, obviously, some field extent, increased And areas on for think QX. same I costs. mobilization service, where caution the those we've the given the - two provided of to

you'll the was sort things example, service costs, on add But service incrementals like So and for when rental I than previously, and add margin. you company have less see somebody that. vehicles - of think not for that training field typical field to you with EBITDA and kind as the then have tools of you we

count back of you grow the of As into sort And work you're rig to that tends to new at, the out. reasonable incrementals. itself get kind that you then

on to because as that's, the we On to and it's about of getting equipment seeing it side, really kind the really there. it front. On that not product, lot what rental you're and the that a margin, getting repaired field the ready EBITDA so again, and same expect whole that be there's changes

you specific service, we So less; because yes, but field see as about product, more want a numbers, I margin; the don't wage talked bit same about. rental, partly to give of in EBITDA the would little reinstatements substantially less

Blake Gendron

I'll get in Extremely helpful. back Thanks. queue.

Operator

Instructions] question with Gengaro of [Operator the Stifel. Stephen comes Your from line next

Stephen Gengaro

gentlemen. morning Good Thanks.

Scott Bender

morning. Good

Stephen Gengaro

So just two discussion. one of share sort quick the on following things, so up is market

On has developed? do there you last any the the material changes that how side, product front over on Has expect going or pricing forward? - been the pricing

Scott Bender

assume, in of it XXXX, of - hit suffer. not would product nearly I'm pricing, terms suffer you Stephen, we've frac But as sure I did think the did bottom extent pricing pricing. in but to

how said, going will there's that - think know I us is our inflation now. the view certainly I our that's scope to going As large And pricing be, to scope be don't impact. I cover but cost forward. behind enough that increases for additional

Stephen Gengaro

a position? cash cash drive business that kind to maybe what's balance you're be to run shareholders How in are strong about you're a your of with of to because you. just as I'm you've on low the thinking to able in more the in you comfortable returning could thinking frame you think thank cash the Okay, you about terms maybe bit shareholders? But - return more such seems opportunities and talked growth. growth And it about cash international fairly CapEx XXXX. and still then

Scott Bender

to Well, the that talking tell the shareholders you're you let in largest me business. first

So largest only we the we dividend - and not have the but shareholders, are lowest salaries.

not certainly dividends. opposed to we're So increasing

question potential that what's the opportunities out like that we like we to the we're the we we And And redeploy not of year, that there cash? we grow we - this least, Do Or the there to feel increase are still in other use the I'm try ask of dividend? think cash not still ourselves failing opportunities. best deploy so areas? - at to we're the the would this course, do cash out is, increase I would clearly we dividend. enough but do that out business. of because of that, ready to say opportunities deploy

need In this we terms to much always do how flow This business positive. been has of free run cash business? cash

$XXX be positive expect capital. certainly increased than million. $XXX no but year million working despite I this because to what cash tell We more it could be we flow a free you would round will be it's number,

Stephen Gengaro

you as changes about the sort And Okay, over as my side. last - if mean, competitive end, is then the obviously I landscape think one, Are far you some product when seeing the were changes any on that competition great one year. in concerned? thanks. ownership you the of quick other there on

Scott Bender

noteworthy Nothing that's really Steve.

Stephen Gengaro

thanks. Okay,

figured you chat, just but I what Just you. to thank wanted

Operator

Gendron the of with follow-up a question line Blake Wolfe have from you Research. And

Blake Gendron

Hey, me to last piggyback thanks did up want here. question. back I letting for in that

revisited we, sense U.S. Just the perspective? and out the is in from opportunities one trying an international? it could potential in artificial In past, for are to a there lift is shale, you expect might what terms Is where of just Have think oilfield? think it mentioned you best I the M&A get that necessarily you've avenue. M&A,

Scott Bender

made lift. who the with or artificial to direct not the that I've ranking. that changed in globally, would choice so a be player. possibility, an since internationally, That's about first us international priorities, in competes behind of least be would terms Yes, U.S. but foreclose competitor attitude I my comment at My

like the take So to I And I'm our an strength you U.S., the advantage. of the synergies you consider, feel particularly would we cost, be arguably in which while chain, international in we quality of able business. sure extract lowest footprint, could agree highest supply is the we think, when wouldn't

that need that we try apply So internationally. opportunity to to

And distant that two something so would be be our competency, core Number third. on number list. - from would my we would that three where a step but my out it's

Blake Gendron

sense. there. could. And the That then follow-up, I more one lot makes if detail a of I appreciate

mentioned normalized running versus challenges, think in are that, not be margins Can international freight East you currently appreciably I U.S. logistical your and the in lower, or on the lower shale. a lower those of us past would little notwithstanding in that you've bit margins product is still some that just than world Middle U.S.? update but internationally a it true

Scott Bender

Okay.

that's case the of International So competitors, don't the of be case case. I Cactus, is the to the in be Blake, believe just answer clear, In yes. margins would less our U.S. than

Blake Gendron

so guys. it. Appreciate you much Thank Okay.

Operator

no call speakers to our the are now further will for audio closing there And I turn back questions. remarks.

John Fitzgerald

you I'd the everyone to call speaking joining for next like thank today, the after forward and with to look quarter.

Scott Bender

everybody. Thanks,

Operator

concludes that participating. today's conference Ladies you and call. for gentlemen, Thank

You now disconnect. may

Cactus (WHD) 28 Feb 212020 Q4 Earnings call transcript