WHD - Earnings call transcript Q2 2022

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Operator

Good morning, and thank you for standing by. Welcome to the Cactus Second Quarter 2022 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Fitzgerald. John?

John Fitzgerald

morning. good and you, Thank We appreciate call. on joining us today's you

statements are Chief Scott and Officer. Our Vice Vice President today Steven be and Operating our and Also Bender, Executive Chief President we Private and us of for call today's regarding Litigation Financial speakers or expectations Will will Bender, Chief Bender, Counsel of Please on Vice Marsh, our the note Officer; make Administration. Officer; Senior our events covered are Steve Reform joining Operations; Act. forward-looking future President Securities General that by Joel any comments Tadlock, projections

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

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

Scott Bender

everyone. to board adjusted that company's report the to good margin the Cactus sixth pleased strong and over growth return EBITDA of best-in-class I'm XX%. consecutive highlighted profile. its John, quarter morning Results Thanks, and and across posted were

EBITDA will I'll were $X.XX quarter. per who the We $XXX paid million. our points Tadlock, our million. cash basis to call and share balance financial turn sequentially quarterly increased our the XX%, XX% of over CFO, $XXX Steve review up highlights results. to dividend to now increased a of first Adjusted sequentially. record quarter XXX by second Some revenue company XX% include: EBITDA margins improved Adjusted versus a

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

So Steve?

Stephen Tadlock

Thank you.

of revenue, margins percentage down fuel to Gross other inflationary represented expenses were measures of during implemented This quarter. leverage $XXX million to in primarily XX% at to quarter. rose XX% and Field $XX rental-related to XX% sequentially million, XXX revenues Scott up performance. in revenues prior reduced X.X% million sequentially, QX base fixed X% revenues XXX to accruals $XXX XXX were were $XX due efforts. of cost largely equipment XX% in cost quarter. revenues quarter, and the basis points gross from as stronger-than-expected than attributable and of increase during QX basis and efforts. our depreciation due first SG&A The address revenue. first $X.X X.X% sequentially driving up recovery revenues is and increase financial an margins cost SG&A the the points for Product to up the lower sequentially, margins of followed higher bonus driven XX% higher recovery primarily quarter, the repair As an up rigs sequentially. of of service $XX.X million during quarter, by the and due sequentially. increase product approximately mentioned, versus successful gross million basis were combined by were declined driven points Rental a labor up Product the costs. million company's were costs

Stock-based in to excluding above We expect compensation million nonrecurring SG&A to $X.X expected expenses. is be any be $XX approximately XQ QX expense million. in slightly XXXX,

the during represented Depreciation first second compensation. Adjustments first EBITDA in reported expense EBITDA the $X.X of million revenues $XX for XXXX to the Second stock-based tax the during from quarter income included quarter. a second quarter. million in amount XX% expense adjusted for quarter million quarter Adjusted second EBITDA expected the XX% third was compared was and the up We is $X.X million, the of approximately of during million similar $X.X XX% in quarter. approximately to quarter quarter. $XX

per which applied for income averaged income per Class were During QX adjusted share, $X.XX XX%. net or in the approximately quarter during $X.XX period. quarter prefer the A changes Adjusted and and We increase per quarter, XX% at share driven the ownership versus second in $XX.X be our during QX. adjusted rate to quarter. for higher income ownership and public third $XX.X respectively, rate pretax of The the million for the the estimate during million ended generated will rate the income tax of and share, XX% quarter. a We an first net expect look quarter. income our $XX we EPS public earnings XX% net percentage, company XXXX further in Barring QX million the XX% million to by the the that XXXX. GAAP at tax was tax during $XX during operating was quarter versus second adjusted the effective

dividend timely balance longer quarter, our Inventory in by to paid due $XX $XX will a per was million modest, net requirements exercise million, discipline million and was primarily $X.XX quarter the members. safety cash quarterly $XX per Board resulting distributions million. approximately of our During paid regards of rose product sequentially, remain of We be share, a the outflow and increases, growth Capital expenditures. up million, decision approximately cash September. in activity a The $X to related to sequentially. $XXX to continue we with flow Operating increase approximately million, business times to ended to second we and our dividend share $X.XX cash to for has $X lead CapEx ensure approved with including delivery. of stocks a

and XXXX I'll weighted to review, guidance financial now expenditures remaining towards the over net the to covers the with remains CapEx That quarter. call turn Our unchanged the expected third for Scott. be

Scott Bender

land rig during X%. increased by generated followed mid-XXXX. EBITDA over highlighting the Steve. of since the its period highest strong Thanks, company and followed efforts rigs Product at reported the EBITDA quarterly during to product quarter Product revenue second XX.X% our improved points as U.S. period. remained share market XX%. per The success cost revenue quarter by over by recovery during the XX%, margins XXX during increased the U.S. basis record

for remain adding high-single end bodes the followed rigs to expected the market the revenue confident we will Product that strong be mid- private quarter. of to third Looking percentage-wise. our We're in than customers share. margins are X%. during quarter public through digits year, the to of anticipate rigs Cactus' Product XXXX, which forecasted well large rise to third and to EBITDA is our the more increase

quality As earnings a of on customer addressed quarter, increasingly we and mentioned improving our maintaining focused our with in the base. trial a major Last release, independent we're operator.

are this more although quarter, the Our not the we the rigs team And with executed in has for servicing expected through customer. reflected second now additional well end of year.

plans to more we and quarter, book with XXXX. America our revenues a selectively during to the with to commercialization now the in discussions major in expect South progress expect order for this abroad. we in continue third meaningful We as and Mid-East progressed we In immediate-term, We'll quarter. direct target by the Mid-East complete deliveries product growth XXXX the international markets NOC. first our efforts the year, testing During trial equipment

overseas Far tightness have from chain, in Regarding to freight started East and moderate. our transit the times supply

of are XXXX material existing addition, of show In inventory. we our following by raw are continued will utilization and optimistic starting Accordingly, to cautiously to the component lead early improvement. costs this signs improvement that margin

were On the rental business, over side Incremental over nearly quarter margins quarter. year-over-year. XX% revenues and during the increased by of EBITDA up the during the were second XX% X%

increase early product quarter, revenue. For This wage during XQ second additional Field to and of are to rental quarter. the a be relatively XXX third quickly headwinds. inflation In number of service, XX% company highlights and are by XX%, the implemented margins expected resulted expected EBITDA company measures basis the and rental offset be period. margins for the to service field point and in an revenue address to transportation a revenues the to service approximately improvement field to ability expected of is EBITDA the in flat

for in up the of sequential business excited the on range strongest going margins slightly a year. of momentum is be QX, into quarter field the the third We we're about mid-XX% to service quarter, expect EBITDA Overall, typically basis. the calendar the which

Regarding our useful returns. management on a can continues M&A, outlook to that be believe shareholder tool enhance it to

such to to However, own. patience this opportunities and in evaluation team discipline characteristics deploy to businesses on narrow our to attractive our shareholders any with remains of a high-quality to keep cash an return The focus will continue ability similar the avenue capital. exercise and

assuaging customers' quality regarding remains continued Cactus summary, growth returns timely and as as deliver supply positioned of So to in well the well service. and concerns

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

Operator

from from Gruber [Operator Instructions] Citigroup. is Our coming first Scott question

Scott Gruber

ahead let you quarters really So ask share just recover like I kind guys your XQ. share about have sufficiently higher of slip solitarily rental. in seeing and thinking in XX% room market, that several pricing But sounds move to we wanted that recapture in are gets in that pricing you get when running of you'll that segment, a the collapsed, of It about given tight that sufficiently nice us rental? market

Scott Bender

for but we're tightness indication relief, market in the some Yes. seeing resulting board, opportunities finally the some increases in price. Scott, some and we're not across absolutely of seeing

Scott Gruber

you months to of XX, were in, So XX revenue getting look there at rental. you call any guys quarterly in Is doing about that mark possibility in million XXXX, back so? $XX or it, back

Scott Bender

firming, XXXX that rental think fact prices they're that are below the I still despite significantly pricing.

envision frankly, the our it that [indiscernible] many I that the meaningful improving, or can't around to for way the products moat And too There's I our fragmented point in our level, them really, business, this getting too respect improvement. I a products, matter, still [moat] don't certainly would market. to a where So players anybody's be but around think, back rental the products. respect rental they customers products, think,

Scott Gruber

about some between private to side? months' that you one to with same I in moving few late oil side, the time, public public budgets guess, X could by year, adds say, reset. price. if draw a to added the intersection where U.S. if lot the and an a one, And going forward likely just talk indications we're up to operators maybe on once in, is frame hearing of those get continue versus activity some the land fears what's risk here to we're some recessionary today the then oil more ask at that Well, on rigs additional accurate, the down [indiscernible] count one start macro a curve you I the Can rig time. prices the if just But can year few maybe could be pieces

of also refresh it but some declines could just imperil you growth privates where that goes budget after rig get the oil So growth offset of the that flat? additions would could and price some what from kind the

Scott Bender

on Let me versus with view start privates my publics.

not market quarter as visibility gain at $XX with the surprise that then expect to believe first our display for large to So flip and when into going first QX quarter, we and tell disproportionate third fourth the have to in we and of customers quarter same gains the did the I QX, traded next you that is publicly in privates the the year. privates we pretty sort towards second not And expect will that that of good and quarter you I the oil during quarter. they share

the made the good our that market I publicly that the end share why traded that's I is large So the by in year, strength of E&Ps. comment about feel

going into in do for right we whether increase it the think but are to it publicly our be the not is pretty reset now, large or a privates. weakness the sure, the can quarter in offset than we but feeling discipline. rig as E&Ps much probably exercising in I in privates. large the there XXXs. the the gut I for low look But better publics will customers first wouldn't will Budgets are that hang mean extraordinary will, visibility in of My traded in capital have QX. that count

our best just tremendous QX, look core Don't that's but the my guess. a so that of base. from growth does customer growth And amount come come in for will

Operator

our Lynagh Morgan question from coming is Stanley. And next Connor from

Connor Lynagh

helpful. you sort raw us and any means what your material for I you how through the much of structure. run help might or of could deflation have items be your was cost Is or would a framework in provide up margins easing wondering on if normalized Any of freight identifying potential can way what deck? margins your there sort be think those

Scott Bender

let will to respond Steve I that.

Stephen Tadlock

material run a to through our them habit customer I have the this product margins But given XXXX costs. to like to that the I'd strong script of just quarter said the But as we in of and we we what inventory, for kind guide a the you beneficial, Yes. mean, product Connor, can as be we and guidance the we side the and takes future. providing year outs end we activity of remain past of in margins and expect kind aren't thing. that been, use at And of all like the expect history said, the that's just considering said, our on and tariffs. and we the in look next ins beyond puts off

Connor Lynagh

Is any of roll you hold surcharge suggest Or raw just will of far? price a approached Can would Maybe degree to to you're the discuss in of how pricing stay? with the you in saying you sort like what of despite thing other side pricing absolute that, that there thus deflation. then that expect is expect increases just this you've material that customers most is off? or it question the

Scott Bender

about Connor, pricing, ever. never we talk

Connor Lynagh

is anything that So there margin point 'XX expect environment? input would a the product that that 'XX, you in the is your commodity beyond would different influence to tariffs business, from to normal more you within structurally

Scott Bender

Far more us. Certainly, tailwind constructive products. is maybe about our a you bring very than half currency our from half the we that East. products. know and of very, slightly of for because

can dollar dollar going strengthening is U.S. tailwind, the I our product to the mean, prove, in be of the then think, half comes easily, on Chinese East. you a figure really. to I the from quantify the change So to Far yuan and

really substantial. the In sort I anything terms of point designs, to of changes evaluation other other of fundamental lower-cost constant than can't

Bossier be, exception more me transit and our our just Far Let contribution from contribution chain. will from improve up. City the less The from as East, higher-cost see follow Far that times you'll supply East operation

Operator

Stephen are And going Gengaro. Stephen is now we with from to hear Stifel.

Stephen Gengaro

come I me. about next sort much quarter. detail step-up there a for nice efforts, a If guidance, off to without that followed of revenue the things per of little sort is maybe cost too giving on And X was in that? start, we thinking you in element rig a bit recovery efficiency just rig just your but quarter? And had could will curious, likely

Scott Bender

be laterals constant, I would Rig constant increase I say, related efficiencies decrease fairly lateral to down, in have in but actually the to been length. attribute more rig and efficiencies an to

per So the obviously, rig longer rig is the can a a fewer drill the the wells hole; over hole, the longer longer a month. it over laterals, is

the some that think labor year the earlier contractors. due I significant rig we among issues saw inefficiencies to other service in

on cement, during They stabilized. pipe. to waiting exists I with the stories I honestly, still extent. pretty I it's that first think have abated. waiting rigs of heard on horror year to the I some But much think half mean, seem

Stephen Gengaro

the interesting sheet you kind And you M&A generation. the out kind an anything I mean, on obviously that's see balance how of market as better, the ago? Is give of maybe Can then cash update what months us there on and worse, as just you the about talked second, side? the opportunities? Is has same evolved far X as there it those and/or

Scott Bender

of terms opportunities? In

Stephen Gengaro

Exactly, yes.

A –Scott Bender

investors qualified a say pretty that’s say I’d better. very ask interested is probably population greater. definitely and know the the answering. of me interesting say that I’d the say bid would are disparity I a buyers reduced. significant. lot the opportunities I of I’d I’d between our is say are question. in

term. X guardedly done over is I be a optimistic did better I of something feel or to than ago. sort that I’m ago, year medium months today even there the So

Operator

will Anderson next be David from Barclays asking our question.

David Anderson

gave I was question, on privates. go versus you you could publics visibility to wondering the back if the the answer

your the terms sort just customers concerns their the a publics behavior year. either just Just of how side, general in in with ordering and privates you Are up equipment the of to looked jobs? in about in front chain change I'm of their the of wellhead curious, in out beginning on talk there, the from starting XXXX? all supply just seen already kind of the curious terms or have of of wellheads that's

Scott Bender

seeing we're we've pardon far than now large seen better and the me, forecasting E&Ps David, the before, public Yes, ever from E&Ps.

view forecasts, are So because good good that really a that's and been confident and that's pipe great now pretty This in the a their this a is gauge. Interestingly, have third benefit. something OCTG occur because they began to of And pipe, get I'm pressures, us pretty they they fourth towards have just the if we quarters. to is that why year. want which forecast including to

the less In far terms privates, visibility. of

David Anderson

guess how those kind of I back that programs fourth So quarter about and what saying the you you're think evolving. goes about to

know can out I all not many know shortages to [so] your but [within] go There's pressure back that there fleets not we or So rigs bumping the across business, about industry. work. discipline these capital equipment we're hearing.

businesses So that can there pricing price a How growth a with to and rigs move continue are to both I activity concern just few on lack or rentals, markets, and about years those guess the aren't you while to thinking pressure capacity of the that lack in capacity, enough that dynamic? if a tied is higher margins in could moderate your of next there over go of that ultimately out equipment products, there?

Scott Bender

frac. about talk me let First,

been I to I've I'm know not a grow, the of low, rigs, view be folks rigs because work less back a to we story. to tight rigs the go who are are another there lot efficient now, the going share bet contrary are here pressure pumping Yes, But to Drilling the upon this just market I'm going in that have rigs. by the business. going are we're to there supply, was another constrained availability take based rates and high. in is decades are some little crew Our of believe added, okay? going right? of be to stacked that so going If that room to rigs, day

to you're not upgraded upgrade I spend some So months money rigs perhaps some think X they going that would people see to ago. have

we'll but many be Money feel. we this quickly. I constrained won't be people as so think nearly moves into constrained, business as

David Anderson

building business, in you'd your and it about share, capital We've much have many been the side the also control there much Is capacity that fragmented. market have is why overall. that on certainly seen discipline pressure just sort out? still market your too maybe that, that. On And there? in talked about just is and attrition control? the Curious of Or in pressure Or reason players? pressure too in very capacity of the much too we pumping people

Scott Bender

I barriers low. too the are think just entry to

they've I been been supply think East. the availability first of the plenty be the over clearly, X because months to that the fleets, -- be although their the available valves, appear Far now. and larger of the I of has Chinese but think adding in intermittent in trouble There to frac competitors aren't getting smaller would right valves valves our I market, having players are that this think the no issues

Operator

Stephens is Inc. Lochridge coming And from next our from question Cameron

Cameron Lochridge

you wanted base? color offer I towards quality I are that of don't base. You you implications are? to like mentioned about increasing cost there you're the you're what in what price, fine-tune doing I some thought we release recovery as what more that your just efforts, snippet could and on of implications customer was talking front maybe on know if customer but some there. interesting the an on that the ask the working

Scott Bender

go When the market service execution to like market, inventories, you answer particularly to Cameron, the probably value tight, as In side this. out those to are the go tight. the well labor products. excellence, to market, adequate out excellence, going you with I customers a remains that's to market we're you but have think of blessed the this to as labor who know the

so, And some of greater on players and large, than by value the place the privates. offerings larger our

and we're bit discriminating market, little more approach. the to approach having just we a we little we be are more a discriminating, as being who about So bit

of adequate thing we The and our that support and cost last that, And them. seriously our their can certainly And time. you don't to large we take -- a lose us, lose we any we I second tell they lost is, I proud can't care business name it I we plans, people as inventory time applied this business. I'm that the on if intend promised would meant took is promised recovery to we we supported say customer, to to customers, of would deliver -- we because and to don't customers the needs. intend repeat have remember any can't

view part there. the And large so way out opportunities that plays a the in we

Cameron Lochridge

And of deals obviously. then pipeline quarters, few a of you've folks just moving over been We've basically, back topic questions as balance this asking, M&A. several from gotten pretty looking to healthy the at sheet, the past

Just a looking -- difficulty today? having a the product, comment you differentiated plentiful, not or are plentiful, that can and profile some candidates sourcing or complements model, how service the And takes are your in of like right there? a of market on if that difficulty what right of differentiated puts candidate target, the wondering but strong the word, be for may the

Scott Bender

but that's who I suspect very those most our believe months them imagination. And months opportunities could never little being would to characterize say with of patience. But reason. of suitable years. are I seeing ago. there I owners are is But opportunity I practice We're that also pretty monetize to today it more you we of the that's fact suitable see an finally why would have this do ago of than candidates. more very or candidates that be criteria. bit any the that I made say, of well meet mention after better a bid-ask a XX candidates tough the as the significant, disparity the plentiful, stretch X as Cameron, have, couple

I why this. that's pretty feel about So good

Operator

David question. now Partners a from And Smith Energy Pickering has Instructions] [Operator

David Smith

regarding with to hoping call a made to discussions the in the Middle back comment on NOC circle an East. you Just

expected testing this Is from next your facilities mentioned regional entail commercialization something could presence? by existing envisions that or You manufacturing 'XX. distribution building product a year, something that

Scott Bender

The latter.

David Smith

And expected to new rough us the manufacturing the on in establish lead remind you kind a East? could times facility of Middle

Scott Bender

in to of XX neighborhood XX the it's months. David, Yes,

David Smith

asked, of my have questions most been but a one. just Yes, quick

the who Given more value in drilling on this have public improving the you visibility that visibility you're place for the customers if translate might seeing all wondering maybe and E&Ps, more types if positive activity at into mix? of forward on on your rental offering anything

Scott Bender

the mean, do business percentage The don't activity companies, the I yes, is very well of in the our being terms activity, question There's our better higher more rentals. control conducted We answer all of short larger valve frac privates business. about no for the is publicly-traded at the frac David. for with that. that pressure by

So you're right.

Operator

back Thank gentleman David, questions. it remarks. to closing like now for the to would for I you turn so and And much, the thank you

John Fitzgerald

with joining call. you connecting Thanks, everyone, quarter. next for the forward look We to

Scott Bender

have a end great Everybody, Okay. summer. Thanks. of the

Cactus (WHD) 6 Aug 222022 Q2 Earnings call transcript