WHD - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cactus Q1 2021 Earnings Call. [Operator Instructions].

Now I would like to welcome Mr. John Fitzgerald, Director of Corporate Development and IR. Sir, please go ahead.

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

Scott Bender

despite everyone. to meaningful challenges achieve weather-related Thanks, fighting John, the to sequential losing. in ability the its and us growth good advance, I quarter I'm in first apparently apologize demonstrated morning that a cold February. Cactus during impacted and

market is underway. adjusted quarter XX% category EBITDA positioned and the of XX%. each We share sequentially product reporting first believe up sequentially robust during that revenues than we're remained Adjusted well now U.S. capitalize a with XX% market XX%. to EBITDA were quarter. summary, more margins increased revenue at was XX% nearly growth In on Our recovery

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

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

Steve? So

Stephen Tadlock

of In from increase Thanks, were were gross revenues Scott. down were points rigs $XX sequentially, an primarily by followed. of were than the were million quarter. XXXX. QX This QX, revenues the million, $XX revenues Product quarter in basis basis of with to approximately revenues, of total depreciable for during XX% combined gross Product service XXXX. $XX revenue the driven expectations. million XX% approximately XX% in than on versus Rental revenues up higher and ahead margins a of wages. up prior up quarter fourth X,XXX revenues fourth XX% product tariffs, XX% million of rental-related sequential basis a to costs freight points on XXX sequentially the increased of relatively and due materials, slightly due the and Rental quarter, XX% represented increased associated fixed above other higher more $XX margins quarter, nearly Field base.

margins primarily and weather. of wage million to an were The revenue points associated sequentially. the related of $X.X SG&A our operational XXX expenses instituted basis sequential payroll-related with to during February's million accrual, up the The bonus was just and reinstatements additions. wage quarter, inefficiencies during We to quarter service be attributable during associates reinstatements and Gross XX% for inclement increased was field XX% were partly quarter revenue to the down second higher product XXXX. expenses decline XX% expect employee revenues, attributable under of to margin $X.X rental increase sequentially.

the XXXX first the during to in percentage decreased As expenses SG&A fourth XX% revenue, a of of XX% quarter. from quarter

to be slightly million. comp QX of XXXX, in million inclusive We of approximately stock-based $X more expect SG&A $XX than

the in quarter during million, fourth quarter, $XX XXXX million in expense and approximately $XX the to XX% quarter million expenses. XXXX. million of $X and period, XXXX. Adjusted during first the during during stock the quarter conditions, represented million revenues fourth slightly XX% Depreciation adverse secondary together in from was of increases EBITDA quarter expenses. adjusted down attributable $X.X from compensation stock-based the Adjustments revenues, include for payroll with quarter offering-related of of from under during down $X.X other of part First million the $X.X EBITDA of up was February just fourth weather

reported $X due during benefits quarter, tax by total asset valuation the to $X amount during benefit We release from tax its first to discrete tax allowance the ownership expense, benefits. relate million We $X second million in the expect changes million March is of million of $X a in a deferred these offering. similar offset which quarter. representative of tax

During public ownership our the averaged XX%. quarter,

the $X.X to associated million which offering adjusted net included stock share, adjusted tax XX% of was during income with mentioned be the $XX.X well generated per associated income with QX public the during completed quarter. a $X.X the our XX% that This March nonroutine approximately quarter. as benefit result related Internally, tax GAAP secondary in the to net XXXX, that XXXX we changes the further adjusted a XXXX. the the result and As million QX offering, $X.XX income common Adjustments the was in estimate We charges secondary at versus for million quarter of costs should were EPS of to our public XXXX. an second the respectively, ownership fourth will our ownership income This follow-on of rate look March application compared and earnings for of quarter $X.X of million end was during effective and included per in million share $X.X previously prefer tax barring of of at rate during $X.XX quarter rate percentage. the of XX% first XX% the to share, XXXX. the pretax in QX as offering. the and per offering tax

per cash in of outflow a share year. approved be in During the million, share, to of of of first including this resulting June also quarterly per $X Board The members. distributions quarter, paid $X.XX to dividend we paid related a $X.XX a has dividend

cash increased $X continued higher to current above over the cash generation payments our levels. the increases free the in activity $XXX quarter and Our flow beyond and during position capital company with dividend-related million highlighting million, of by associated working approximately

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

net I $XX CapEx guidance our covers turn $XX back of million. in range to the to Scott. now such, million As you the That XXXX for review. And will remains financial

Scott Bender

the quarter noted a revenue management in accurate call, as revenue We last categories. over our growth conviction, first proved forthcoming. Steve. Thanks, This on XX% achieved that strong improvements during all were we

product We highly momentum quarters, continue winning successful recent positive in operators. In we've existing with to from customer both activity generate customers. been new private and increases adding business by

publicly rigs represent now the up While of E&Ps operators of followed, the from represent customers, X/X sub-XX% year. to large traded our during our continue over majority of private middle last

same of nearly over today. the followed the expect our XX% XX% privates Cactus' increase XXXX. to from approximately XX% second during increased Over by with currently quarter rigs We the to period, share market

on rig lag Given the approximately QX quarter, margins to gains a normal basis. and revenues improve confidence of headwinds QX's the by improving and from customer to are to offset over our EBITDA in ocean highlighting market related we rising sequential basis times increase ability product the XXX points steel second freight costs. gains, during to some prices expected expect continued XX% Product efficiency dynamics, by

to rental the as up of XX% suppliers domestic more geared percentage side On represented revenues reliable revenue, the from rental quarter the a considerably on increased with these basis our during business, efficiency from equipment. a during Xx Revenue sequential from quarter innovations of Revenue generating the the fourth gains returned nearly our to XXXX. customers quarter. mid-single-digit during of up technologies nearly was

activity we margins we be market XX% revenues tailwinds as quarter, the QX. sequential year greater in Revenue be or revenue until line be expect the marginally digits percentage-wise late in remains to quarter EBITDA for rental high expect product likely up rental highly don't For the decrease and service, and materially second single from both DUC market reduction In product This products sequentially pricing tighten to And in field has range our competitive. We to upside currently rental basis of year. continue as a first on the percentage activity. early as expected low this to to by moderate. business a is potential next driven our expect levels.

more and most commitment support average. quarter. see field report, service ranking oilfield companies of depths downturn. in company's our last the during April marks categories. surface in following highest expect for run EnergyPoint gives for engineering In revenue on increase second production Across products, surface top-rated multiple in year's focus versus associates amount execution the of customer In safety, April, than published the that that we summary, to like the EBITDA survey opening during range a reinstated rollbacks XX% to few satisfaction recently occurred at This continued the quarter wages by mid-XX% grow rate to In We the Cactus indicates and Research's items the first post-sales the revenue the quarter. industry's of trees, other of and a can and one in recognition had that wellheads all equipment design. company I'd and second Cactus close line highest the the was the achieved confidence whole least to questions. highlighting by before us margins

our piloted represents will friendly believe in well to equipment the a from generate electric power for We the On at by to the site. first Cactus self-sourced, type more less received focused The differentiate innovation its peers. April. and of this technologies front, power-generated customers equipment environmentally time technologically has continue way well been we

into Arabia Cactus current related made remain this beginning rental personnel during and enthusiastic deployment. preparations the timing. we've to is arrangements awaiting rental required enhance taken per Mid expansion year, $X team we abroad. the COVID-XX. the we as further East, shipped send But remains demand to recently date exists revenue region, the ship has uncertainty in in to of generation item for Mid into currently remains our about sales though million The whether restrictions Regarding East today. equipment travel Saudi second potential potential assets finalized market. this equipment the half and revenue quarter. to anticipate assets to company the gating initial opportunity evaluating in-country approximately our additional to for We've the have The the We of our have and

optimistic and Regarding activity are evaluate our summary, M&A, makes we opportunities presents ready In such continue of sense, carefully we'll upcoming opportunities. the and that believe to favorable remain recovery to industry consolidation advantage to within that we our positioning. about monitor continue and the take

the to Q&A. and over And back we can operator, begin I'll so with that, turn it Operator?

Operator

Instructions]. [Operator

Your of first question Bank line Mulvehill from America. Chase of the of is

Chase Mulvehill

So number be has think much the talk think you're if and to will about, I that how much. been on XQ? least But the so so we can margins far, I side, been me push able pricing product about product push how is can able about rental I been been going guide we in give you've much said the XXX on will you pretty the know to you've obviously, obviously side. you on around if of not price. that bps. see to that commentary pricing that how able up you've get when mean, to think And we price? not much But at pricing, positive, pricing

how So seeing, the it wellheads? then of back Or flowing flowing is is half? also of pricing in in continue it the through XQ And you're kind is through more that versus trees? that much

Scott Bender

guess and quarter. about I'm just and to wellheads second the Yes. the the quarter, is full in The of the half trees. impact, that impact pricing in going about half third

Chase Mulvehill

that to Okay. intent, if push to I improve, then able right? be continues price. right. That's helpful. you'd All assume That's the would continue market to And the

Scott Bender

yes, expectation, the That's Chase.

Chase Mulvehill

Yes.

actually you about quarters? then seen I and you maybe more, few sizes And And we is share happen that the you a business? pad that of pad about think if heard around So bigger maybe you pads, do always which about could privates. privates bit. had, Because just of you've - Are kind if isolate obviously, that kind them that wellhead the past talk kind smaller of growing, Okay. talk pads. do speak of your conversation guess, over kind to of to One see the sizes? see starting gains increases value little that what we've if you have the market

Scott Bender

Yes.

or know seeing think sizes. it's I of address you I that? say in not increase can sizes pad Steven, don't whether any indication decrease. really to seen that privates have have general, that to fair we're I pad begun

Steven Bender

- don't I tangible. No, mean, nothing I

Scott Bender

decreased sizes year. in But pad this have general,

Chase Mulvehill

Okay.

attribute there - you what privates? for gains focus Cactus on the So a share about Is would side? bigger to just private the market on

Scott Bender

It's of like - Cactus those of personnel who impact our finding lots of reducing used customers just our way larger at it's customers, are management their the Chase, privates. over really into using to the and personnel positions lots

really XX taking and expansion management over years the privates. an relationships people we the of just fostered now last it's positions So these with that

Operator

Your next line question Gruber Citigroup. from is Scott of the from

Scott Gruber

a there's which here. as privates season from earnings rigs the of with bit So debate this add vigor to

their cohorts, What's to But the and on a majors appetite probably Some more will suggest add to are it you that lose privates on today? rigs, question? other is the And steam. color X will and your view continue. rigs? any appetite publics, what Others which trend are continue to half across of add second saying seeing the the cohorts of the

Scott Bender

Yes.

think view And comparison the I of saw privates, kind year. see the what to this majors picking don't up the large the for I XXXX. our so the rest significantly that that of publicly is we a disproportionately increase reverse in E&Ps, year, will until of earlier traded E&Ps,

but I segment So think at the the starting of year. will benefit to certainly begin maybe year the from end that next crystallize

the a traded E&Ps, second So the I publicly least - of at year think tale half large will this be for traded Cactus. of publicly

Scott Gruber

conventional additional some on does What's require Do there. question fleet deployments source color rental frac then deployment with for independently? deployments? a basically Can outlook in equipment. you deploy the joint And to a you And you. frac fleet? Got an electric electric source second a power? Just power the it

Scott Bender

absolutely. Yes, designed fleets. to It deployed was be conventional with

But fleets. own power can was electric and produces not So it's We that with off be It can of how self-contained. it use power. deployed source. It designed. why its that was

our - why modest. existing fairly a really is requirements of the retrofit expect So this are we CapEx assets. That's

started So we second between cooperates, - to that that, in intend really to end to year. fleet roll the extent we through the - the of the market that the through the We'll try started complete quarter.

Operator

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

Thomas Moll

is on But to to which product at I what wanted continue able on you was to improving is ago. you're share side, least side that early as cost to start inflation to take enough the inflation, at something price and a any that as on anecdotes sounds cost can improve you've quarter the discussed margins and us particularly It least with like, there. measures taken address those? market

Scott Bender

of Joel I'm stories. to going you done mind, the keep impact. of about because very is Joel. ahead, going Joel worst back what tell - and to to course, in let tell the himself now address the mitigate the not pat the going you on He's to go But anecdotes he's

Joel Bender

and and inflation. freight It's been period, be material raw all all of way in you. early between negotiating additional pretty challenging ordering from and and pretty But issues comes to down. on the proactive with to a we're try tough been It's keep fastidious, to products were sort It's we're started to product. sides pricing coming pretty when tough honest We around. wage it

we we spend of pricing successful in to much the down. lower-priced but So as could marketplace. avoid trying we've I've successful like suppliers, were forecast, avoided as not much some double-digit trying to as lot on. in the do, And looked doing they that time working I've goods in a increases, able with normally we been to that, increases negotiating been buy prevalent our more time, early

lot if news, with of started we that early containers Because if wouldn't $XX,XXX terms rates. spot container market. gone In on so hit the on excess buy you're these higher $X,XXX read a to freight, sure you're from in get I'm you've booking trying addition, aware, of in we of have that

shipping in now. we We So into advance product advance. book of in X ports weeks to X our lay the

can the reality have continual But we So we're honest it's to trying costs. anything is these do that these to and battle. increases do we mitigate additional a

Scott Bender

for example, What last... would say up, the in gone has steel you

Joel Bender

numbers. and next. at order much. seen it much ordered double-digit been upon If I the it XX%, of seen last It's go ordering this I'm up something as depending one the year I've year, to XX%, I've end as that

battle now. constant a it's So right

Thomas Moll

that could M&A, more than, likely That's or all you to days given very in transactions I'm the or ago, last Scott, in the time versus helpful. is a we've less, into appears up where at say, If back we are expectations generally XX or you comments, say, the in your from the just the it it is commodity shift curious I referenced it if time, level you moving WTI Are still right. before. industry, At spoke? less more heard same seller mid-XXs

Scott Bender

time the that's best first to have first on began takes edge. have second get been the that it what I the quarter it last would towards say done in I earnings year, I'd this I it. of over the sometimes to end And mentioned guess, call. to harp people when

So markets But aren't low money for think will just people prices WTI Tommy, the in make I are don't I be financed. people industry. in America. The are XXs, capital think terribly still support with higher. that exists. struggling Even working well challenges to some there's this opportunity the North there capital The that

this, you So But opportunities the sellers' answer have the expectations there. to increased. know are still

our currency has well. as Fortunately,

an transacting. So roadblock insurmountable I to don't being really see that as

Operator

Holt of next the George & Your O'Leary Pickering, from line Tudor, of question is Co.

George O'Leary

margins Just a on forward. incremental question moving

for increasing, at potential you laid higher But fact well everything moment. you out, pattern outlined a it's like cost some it the prices headwinds the ball far the too have question, for just given incremental second kind not the of there's quarter. crystal really seems You out, margins,

incrementals expect headwinds third purposefully answer quarter? the cost should higher in asking we that those abate, you can a question And I'm quickly. Assuming

Stephen Tadlock

save XX as we'd as answer just them incrementals margins of usually because like they're in better But category in our QX to margins, to in quite that slightly the pressure the return market. kind words. And like terms obviously, great better I'll But of front. said, we him adjusted for rental reinstatements not and we on at in our and that projections you expect each our a general, and EBITDA wage QX, yes, look level to are of forward.

looks more yes, that think So that, QX I positive forward.

George O'Leary

there's Helpful. outpace that more growth think in you an - spreads standpoint like Is dynamics a the of pricing And growth also where so market realize more should you're great from attractive? not the rental pricing Or I pricing rental being of there more in products said coming I than added? going growth. component. is still terms Great. products to not frac then is the just underlying activity play rigs sluggish position, not

Scott Bender

you George, it. got Yes,

Operator

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

Connor Lynagh

the I activity of and stay takes product. you we guys side well-capitalized we you Maybe mean, you're an companies up, talked this? understanding could really pricing beat think gets that? frac rental? in few reclaiming pricing think how this pretty attrition it obviously rental Is angle on things higher one I What Or the materially you the about do is my out drive are equipment think do there. to of on here, need there general to in

Scott Bender

Yes.

increasingly the that's repairs become competitors so our for not particularly definitely many repairs now because and expensive. think play, into just an of are attrition factor I coming there's charging

think, that, attrition, the I think market. beginning the of why is year. I next comment think But some And tightening be end the to in year, of the absolutely to needs by see there price you'll going attrition regard. some made I some in also see with I that coupled we're So improvement that

we those. both. a combination to need need clear, do - But we So it's be of really

Connor Lynagh

guys Yes, the update thoughts And understood. you quarters as I improves the missed, if - any uptake around market And recent provided in just apologies innovations here? on have but an potential on here?

Scott Bender

diesel the lot generation. maybe our provided outside whole mention detail, be of of except that, a fact - going power to of we're except haven't We this course, to generating

We're far time were we year. rolling this more be digitized fleet, as than we'll the that through today mentioned So I here. last

manage of we we're responsible, So zone. operations, frac all can the for exclusion the which outside remotely of

we to begun downturn, I we've think that the our as focus, last on design. in did valve really market

is think to that going critical repair cost I forward. be going reducing

down parts Every the frac for spending of time lot business. comes it's companies one the is So us time the And at allows night. valve and we're bones costly of a it process, reducing that valve And the we're to of repairs. really rebuilds few to sleep on very, a completely that tears robust very less a in, need it. a sexy valve but its

direction. of So R&D that lot we're a efforts addressing in

Operator

from Our next line Ian is question of the MacPherson from Simmons.

Ian MacPherson

You've you've commoditized of like of looks year. the if we're this struggling. those semi-structural, capitalized at mix to spoken And your structural, oil prices. And seems the some a with really well those. fact part for that not the part customer higher that on more still in also point shift And of capitulation it are of business

X dynamics, been medium, longer story but those for story. wanted of to muse It XX% end up the So just you ceiling share. on be the seems market term to the might has getting like ask to good not a just given I

you keep if or less, can to I thoughts XX that. And get on you words So it your want just like.

Scott Bender

Okay. I'm try. going to

I First, is going pay matter what that value it's reiterate can are to that of share attract market our gained, I'm we last a whether is And customers mentioned that to there us to be for but going quarter. not proposition. or

market proposition. us is to value not add is Cactus can we there everybody everybody believes - So at pay think, I But share. going for our

second The is just wellhead in witnessed going competitor of part out we've that segment. the a business

several. of first the that's that, think I

they're have reasonable back And be they've they constructive been haven't a they not players, been to of getting up Tier very X level. rigs. to terms prices - but sure, Now in

out Weatherford capital wellhead you this could announced So working business. of the going think year, providers. the attrition as in were I I increase, see that particularly that some know wellhead be they requirements mean, we'll

Ian MacPherson

Yes.

Scott Bender

wellhead - awful I of right there think there companies out Ian. an now, lot are there's

Ian MacPherson

I I addressed ask now. soon. Well, I stay you've will Good. for another one on M&A, think it would but

Operator

is question of Stephen next Gengaro Your from Stifel. the of line

Stephen Gengaro

don't willingness you have at the about things Two M&A just of sort you obviously, a what is of I as any nothing lot to One, there's the cash. as materializes, of just perspective you lot today. mind. mean, change But policy? and/or - a opportunities, on if people dividend who sense I'm to obviously of for curious time look there your care. frame that extent curious

Scott Bender

I'm to still the Yes. that same is you have we're give going to answer I've given that shareholders. before. largest And the

So all is since our cash for balance sheet don't on a not helpful work the we family this for salary.

So the hang least our M&A If around going will as keeping reduce, balance we're to an I - Because probably in going Having only we those best turn sheet price. to optimistic out that our market about opportunities opportunities view at as balance it's decent that, not sheet. - frankly, for year. This to fruition, expand on said to earlier, not guess, I interest reason as waiting the heals not itself, have our the the opportunities we're this fairly, forever we then cash is clearly, of I'm opportunity. is dividend. a a market keep it at this think, to our come talked

Stephen Gengaro

see meaningful to a Or international. a If I in that bit you 'XX? And later impact start kind then momentum do little we has, to the that? about as significant little about How of think you talked you see think Got - mean, of we'd to than take and impact sort the a a longer it. gain would think think timing? kind we should profit of about going impact it's more

Scott Bender

of second I half think XXXX.

Operator

[Operator Instructions].

Energy line the Advisors. of from is of question David Heikkinen next Your Smith

David Smith

heard that XX% the revenue on high I rental in say up margins guidance. QX correctly sure wanted you to make range? Did I digits, single the

Scott Bender

Yes.

David Smith

impact Okay. disruptions. expected some may have rental storm margins QX And from the I reflected

maybe I something color for flattish the there international was margin you just with QX. Is deployment, Is costs? rising in weighing behind little segment might staging pricing So help stepping a down else, hoping and some more? this

Scott Bender

for we've very have else. - really, ourselves in But July environment has not do So as margins. impacting the helpful. a before. in preparing pricing this we very say, most it and more great than fact, do in would business But of is, have we - frac pricing of it mentioned are don't so environment I couple large We our visibility our anything to we've with that's June got just that's deployments

Operator

questions. continue. There are no further Presenters, please

Scott Bender

I time Thanks, your Cactus. your appreciate everybody. interest Okay. and in Stay safe.

Operator

that, call. concludes you with attending. And this Thank for conference today's

You disconnect. now may

Cactus (WHD) 9 May 212021 Q1 Earnings call transcript