Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. Welcome to the Cactus Q4 2022 Earnings Conference 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, Director of Corporate Development and IR. Please go ahead.

John Fitzgerald

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

are Chief Scott and Officer. Our Vice Vice President today Marsh, Steven be Administration. and General Operating our and Also Bender, Executive Chief President us of Financial speakers will of Bender, Chief Counsel Bender, and Officer; Officer; President Senior our Steve joining Will Operations; Joel our Tadlock, Vice

covered regarding by any comments Private are we projections call or that today's events expectations note Reform Please forward-looking Litigation on statements the Securities Act. future for make

Forward-looking and statements are control. of are subject to a beyond uncertainties, number risks which many of our

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

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

Scott Bender

everyone. good and Thanks, John, morning to

records for EBITDA. During the quarter, consecutive quarterly EBITDA the company was growth. revenue and adjusted fourth adjusted also with both set This quarter eighth our

strong fourth were I profile. was results return usually is quarter our company's The the of particularly factors, best-in-class weakest highlighted categories. but the pleased with to and revenue the each margin board performance our margin due seasonal and in across

record versus paid share, third adjusted sequentially and per basis million; X% cash XX%, highlights $XXX EBITDA a balance quarter our record million. to increased $X.XX dividend to $XX EBITDA a the $XXX to points margins adjusted by fourth of XX revenue were improved We increased X% up we million; quarter. quarterly sequentially Some include a company company

results. turn to will the Steve over financial our CFO, our now review who I'll call Tadlock,

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

Steve? So,

Steve Tadlock

referenced from today standalone and weeks. transaction, the Thank all you, in impact Scott. close coming for a that not to Note be only any will and forward-looking expected inclusive potential the of pending FlexSteel Cactus data is which on the historical basis

$XXX prior QX lower Product of revenues X% rose higher up than due by Scott branch in were largely As operating million rigs sequentially, XX% $XXX followed. million margins mentioned, gross were driven revenues quarter. Product an the leverage XXX costs. of X% increase and of points basis to sequentially primarily

versus third Rental were expense. revenues and were X% the $XX well as margins due better quarter. to up costs up XXX Gross basis lower million depreciation quarter, points declining management for the repair as asset

in other revenues approximately approximately $XX represented with quarter, and rental-related service Field revenues of and line QX during This up the product X% combined expectations. XX% were million, in sequentially.

acquisition of points XX of was Gross million and $XX margins were quarter, the by driven expenses FlexSteel. increase sequentially, to SG&A fees and The related lower up basis pending up million to expenses, the were million were sequentially. supplies expenses. $X.X professional which $X.X costs XX%, higher attributable branch-related during

Excluding $XX.X these revenue. was transaction-related and expenses, SG&A of X% million

quarter. transaction-related up Fourth million. $XX fees flat quarter approximately with million SG&A third adjusted of was to expect of relatively stock-based approximately from compensation We QX exclusive million, expense $X in the during $XX EBITDA XXXX be X%

the to and agreement. to tax revaluation company's acquisition-related and compared in for million stock-based fees the the XX.X% $X related quarter. Adjusted the during included approximately the fourth FlexSteel of quarter EBITDA XX.X% other represented compensation, EBITDA in add-back of expense expenses, of million receivable Adjustments an in quarter third $X million $X XXXX in of revenues to

not million in previously quarter's for added third to that were the EBITDA now quarter our exclude adjusted acquisition-related presentation, of Consistent XXXX to we've with back the adjusted $X results. the expenses fourth revised FlexSteel

expense Income is million the of expense expected the the in fourth approximately during Depreciation first XXXX. fourth quarter $X million. million, tax quarter $X.X quarter for was was $X.X

During of averaged company the quarter and public the XX%. ended Class fourth the at or XX% A the ownership quarter,

in equity expect the this of our first for expected ownership outstanding QX shares offering the XX% A approximately tax January public Following of we average effective rate ownership our during changes XXXX. XX% completed further year, is percentage, Class the Barring quarter. of total to we in an

during The expenses, than million various net more by million our decrease QX driven GAAP profit categories. versus $XX income quarter. which was XXXX higher across revenue was in offset the transaction-related $XX third gross increased

net adjusted and at which in $XX quarter share, share look and per versus QX $X.XX XXXX. fourth the were per share, to million respectively, prefer income during and million earnings We per $X.XX $XX

Adjusted will applied the net generated We rate first quarter XX% adjusted quarter rate to income fourth of for XX% the adjusted EPS be the pretax quarter. a tax the our that XXXX. income for estimate during during tax

million for $X the acquisition-related that third XXXX not of adjustments added the stated, to previously revised were As quarter the in back. previously expenses we've include

flow the to During approximately to January, quarter, cash share, a approved a Board per the $X.X members. in of of $X.XX In of a be resulting including $X.XX dividend million, dividend per paid balance we capital cash million, fourth net share outflow quarterly sequentially. the related distributions during March. million of approximately in outflow We the Operating $XX working of million with paid cash up ended $XXX a quarter was $XX approximately with million. cash representing quarter, a $XX

in of was to payable seasonal a decrease payments. This in the part due driven timing accounts by

anticipated addition, declined in quarter advance inventory of In declines. payables first

during quarter of percentage Excluding the transaction, and a a relatively XXXX first capital non-routine as working down following strong with net January. revenue associated items we FlexSteel of flat expect be to the

and expenditures. the requirements Capital $X continue for regards approximately business million modest, quarter to during was remain we'll our exercise of with CapEx XXXX. discipline to fourth Net capital

capital in inclusive currently expect $XX to is purchase the for range facility For to to R&D a This property XXXX, approximately dedicated of the Houston, international we capital and end in leased potential year. $XX the to million the of $X expansion assumes toward of growth net be build-out million. new expenditures of million the $X million a in it domestic of million, $XX

over and financial now turn I'll review, the That to the call covers Scott.

Scott Bender

Steve. Thanks

As stated revenue XX.X% period line approximately XXXX record the quarter. during earnings XQ rigs December projections last product US XXXX, to we with rose the X%. market as the From of during generated XX by provided in through earlier, and share followed our call. company increased during rigs added EBITDA

points Product quarter by EBITDA basis XX%. to the margins XXX improved during

we During been in offset we partially came slight particularly the rigs increase our quarter, with which basins. rig public the companies, operators. in XXXX, but public private of a mid-single-digit a additions has private also our decrease fourth percentage rig by during gas followed, from Thus witnessed rigs far, followed, increased count majority in

up be to For the X% in XXXX, first quarter despite the average land rig US sequentially of the overall still rigs followed expect decline Cactus' count. we X% to

are swings well-established As be producers to you know, who commodity tend less our reactive short-term larger, oil to prices. in core customers

deal Haynesville, we're prepared on area the have Nonetheless, an in weighted the will particularly that towards impact lower to privates. with the natural industry, prices gas likely

the excited enhancements, introducing also are We stages in to wellhead be final several which testing. of technical are

over XX% forecasted ability market to achieve about XQ. up is expected in product Product XX% XX% range first gains of of of good in to market be as for margins the share feel approximately versus X% be We February. to XXXX the quarter. quarter by prospects revenue our share EBITDA the are to First evidenced

regarding no there product by for an Mid-East are From in really XXXX. perspective, plans the international changes our commercialization

In opportunities benefit of addition, from Saudi. to we continue outside

increases the the up On X% revenues drove over during year-over-year. XX% the business, quarter sequential and rental International improvement. side line were of increased the fourth top

EBITDA flat. with For enhancements. as we remain the the should potential expect XX% in late first of quarter revenue relatively low margin expansion this XXXX, year to be for introduce cost-saving rental we range,

during fourth during the by weakest XX.X% product quarter, rental overcoming EBITDA XX quarter basis the period. combined In margins what the seasonal typically the year. and field of revenue Revenue points service, improved of was is

first XXXX expected Fuel revenue. is expected for be margins XX%. and XX% approximately to are quarter service to of between XX% and rental of remain service EBITDA the product Fuel revenue

Regarding is this optimistic the FlexSteel combination. and management unique acquisition, excited about

debt the proceeds in FTC and made time, month, From waiting we raised an or this $XXX this DOJ of $XXX upon offering expect earlier during substantial million quarter closing, from which perspective, transaction noted comments we A occurred no January new close first financing from successfully we to of credit a have with million $XXX regarding new period. facility on received our had At the a Term progress financing. during million net facility the equity HSR As permanent a upsized year. this revolving

with financial quarter in performance fourth line our expectations. was FlexSteel's

Following the closing quarter. the the financial expected sharing will impact look on to of details the provide forward close. same transaction, we first Cactus the once We additional of

remains Cactus unmet healthy optimistic weakness which regarding for primarily natural base, in well deliver oil-focused. and backdrop. recent we're Despite an is our positioned prices, larger shareholders customer market overall to gas

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

Operator

Our Instructions] from [Operator Barclays. comes you. Thank of first David of Yes. Anderson the question line

Your open. line is

David Anderson

good Hey, you? How Scott. are morning

Scott Bender

David. are Hey How you?

David Anderson

I great. onshore was see kind timeframe. US XXXX step cycle, compared XXXX you really bit of the market you just looks of kind can of duration a it cycle or about talk the to, say, and hoping this XXXX -- the US maybe and other back doing of little of kind overall I'm kind like overall to how

there. for is You story. touched gas the sort of end waiting Everyone natural on this

effect. ripple this have You

services to market. collapse people US Some are thinking going is the

I the mean disciplined you fewer would cases But a there's of players. in market? Everyone and more terms more resilient capacity make pricing. seems in

kind in I on more Shouldn't duration? a as cycle maybe little think Can all you're of well. you bit? business this expand with in that a your seeing result

Scott Bender

right. All Wow, David.

seen the same about operate, seen let a high area the is The Haynesville Haynesville. sure we've very So, you by in it's weakness -- we've the I gas. that. me talk not seen cost to We've know is think weakness players. and private What that in I'm Northeast. dominated first natural

prices, that would gas expect with would one lower suffer. So, Haynesville the

seeing redeployment out For have those into multi-basin rigs that of basis. our and of customers those Haynesville quarterly exposure, we're the a of

activity. So, of $XXX you customers those Haynesville. them all likely think basin turn regular you to that I that of major we planned indicated oil now attention our will let know no basis. can They And offset me a and expect evidence increases so our about on continued seeing large customers tell they're and actually our us, tell strength. reduction that that if areas personally I only losses in none I'm the customers, to activity. you all activity my the see in And with know on visit we increases, of maybe what

don't well. Bakken that demand actually David, feel the you in Permian, in go there's I enough the said, And know just I on as like could to Haynesville. well indication how of

in of maybe than that fundamentals of on oil lot think bullish probably a more terms I fundamentals, I'm people.

I think are now. Well rates right disappointing are disappointing. production efficiencies US

up, open I are I which pretty has oil China good I implications think current see Russian some base feel to of gas terms on about I think we're Haynesville. duration opinion that Gas, also think biting. that the makes the want China I But cost. start to for offer up, gas in opening going to don't of even except $X sanctions more cycle. that sense this going

David Anderson

So, that to could be that that apple and natural look a of than to here Is pocket. you're tip doesn't more way kind really at -- big gas fair of it? enough be the like cart not it really an concerned air that sort seem

Scott Bender

about our concerned flow. customers' always I'm David, cash Well,

I'm gas on the -- the be of not of And the And reduced. of have flow going this that I gas customers. I natural concern two I've rest the prices with over last don't don't And to the them so, about is extent visited our are -- think many going natural weeks. impact it's low, cash to overreading to

very very, recent. been it's So,

David Anderson

smaller gave kind us just it's market. well little everybody that around to I and you working you a love know look to just you're on want hear. now. tell outside all But the M&A, us things dying of -- deals always site, deal, just doing. to good you're That's this about different I about the right your But you're to already ask this FlexSteel, at

two no really fair than is to most Does of the actors know is growth East the more in years? M&A -- -- of about another organically a the Is Latin a going There's it -- talked And be seems M&A opportunities -- you've The expanded. just bad then three area that more of America just it sort Middle I say maybe there's you over that hard the on more reality opportunities next equity pretty to tell. are make likely side like money fewer private that consolidated we route can there's because market? is route in the the kind organic or of gone.

Scott Bender

But are no fewer I in There to to lot buyers, the and would to opportunities. awful always I'm my this say said -- has there market. there people interested during of are are preference certainly I've going of -- are My time. be period reiterate but will before. an consolidate in David. who been monetizing There fewer are what fewer continue no this opportunities,

And I that an unique -- about checked this you think think we need was can't I reasons. of incredibly so, I the I and that when the boxes. to opportunities, FlexSteel all all opportunity know at looked consolidation. about another think company, M&A about for company think

there tell to FlexSteel, not We say you there's not there? I or opportunity for FlexSteel. growth internationally. Is That's out haven't look organic another FlexSteel another probably would seen another but an

David Anderson

guys. lot a Thanks

Scott Bender

David. you, Thank

Operator

Go line line comes you. from ahead Stifel. Thank question your of of Steve open. Gengaro is This the

Steve Gengaro

everybody. morning Good Thanks.

Scott Bender

Good morning Steve.

Steve Gengaro

me. for things Two

could you margins the you -- I the outlook. quarter you board. strong know first and on across the some fourth you start gave very When -- color If had quarter good in

the you about your about seeing product trajectory assume some little Can side And should how the a as would a be for from you're half the rest talk year? maybe thinking enhancements, conversations and we I you back about a of to just talk in year. which pricing customer be relative inflation what sort that, positive net perspective of part bit margin of the the of with and would did technical on

Scott Bender

cost margins that good I sustaining the team of Yes, pretty terms think impact. this feels about in

has higher job but flow We of of to rid of remarkable a done seeing lot input through. now replacement our just we're the Joel we've are cost a have this managing costs done and -- think costs, beginning I inventory, costs our to some get decline. of still

from margins, that So, perspective has a think positive. the on cost and feeling impact I pretty that I'm that,

Steve Gengaro

supply you those do talked along Where chain bit of know issues of little supply the you using maybe a chain lines, because more some just out And the Louisiana -- capacity I about of now? stand issues.

Scott Bender

much to refer times Transit this, I'll Joel -- mean I improved. can on are I but--

Joel Bender

of of that The available. are things pockets It's like supply are resin to still problematic, sort normalcy. material, actually some it chain elastomers, is that. There return

we've You done. just have to ahead plan which for it,

the up In you week. China ship and terms a things, about shipment, pick port a and weekly now of off pick and of vessels it up can out it in of drop

So, that's returned to normal.

is yourself if of like there prepare contracts and we no challenge maybe you only the should But do, think be have in I light product. there sailings. you disruption terms getting the

Steve Gengaro

Thank great. you, gentlemen. Okay,

Scott Bender

Thank Steve. you,

Operator

you. Thank

of Our next Smith question Pickering comes of from Energy Partners. the line David

Your line open. is

David Smith

you morning. the bigger But to now, looking questions and good Hey, first the Thank my taking close questions forward my for for asked. Q&A. quarter and really congratulations to on were

couple minor ask the of a gas ones. we'll back theme. Circling So, to natural

additional that if but this, with missed wanted programs you're oil I became to if accelerate conversations having ask them. if who Sorry clients indicate I any to frac might they available spreads

Scott Bender

so they're not by as customer no. dominated reactive. The -- larger Because is nearly is base our short answer we're players,

in frac slight and mentioned the have they result not most plan so our indicated of pumpers. customers of a activity, their pressure in increases any major have change of availability as additional And

David Smith

I but circling had sense, segment. enhancements you to perfect to introduce to And in innovations back ask. Makes the plan the or product just

we should Just those, any I'm are you wanted forward strong. just and share because if share more share I really already it your market those as to color on And hearing all to so about maybe to be but to -- ears beneficial looking margins want market ask accretive potentially those. to margins? about or ask thinking

Scott Bender

share. one always don't innovation Yes, to terms -- David, we've our in we greatest of of our if defenses market continue believed is that innovate

think perhaps not enhancements I And people these were who customers. will attractive yes, to be Cactus so that

But and ability provides the our to for to with provides and but It only this real reason we the not continue what protect market the what to ability with the offer is our importantly, expand retain it gap offer. margins. between share, us, us competitors

David Smith

execution, ask color. Great And Appreciate out if mitigate think forward, how up one seasonality historical was well one. the the that just in field this The to if you minor protection, whether service in the fall better were going trying to maybe wanted can to hit basically quarter. I the to margin through exceptional And slip figured margins. year and get answer. I margins able fourth to you if remarkably

Scott Bender

field I'm Yes, answer that. We let service department going to piece. were with very Steven as quarter That's all our very, his surprised fourth our pleasantly results.

Steven Bender

proud of we the reiterate, just we achieved in Yes, very were fourth to I quarter. what think

in quite inflation levels, keeping that, I utilization trajectory. an things will concentrating this service more on that so field on bit wage at continue think but on a we're in eye still the optimistic pressure of There's we're that point.

Scott Bender

do haven't for good do monitoring competitors, job David, I we utilization. of a we -- lot worked extraordinarily but probably an obviously, of

usually particularly sensitive the that the quarter to fourth So, holidays. we're drops during it when of because

better we continue think We will lessons forward. better I I So, to year. those planned this this take and -- it I think don't year, executed

David Smith

for the international forward all stuff expansion, you that lot looking for there's Thank we're you color. to. and all your time. good Between Thank the acquisition of a

Scott Bender

Thank you.

Operator

Thank you.

another is Stephen of have line Stephen, now We question your from Stifel. Gengaro open.

Steve Gengaro

is ones. market the more Two Thanks was rigs it in on combination? you it this questions existing highlighted the share from improvement saw taking February, sequentially quick Or is for is what and gentlemen. we new a customers? One customers? Or

Scott Bender

a combination. It's

Steve Gengaro

call of the other give and just FlexSteel differentiation that's brings, differentiating I one And the Cactus maybe you just us this Okay, factors? can story. you a great. a part sort on and from key refresh, on the of know but the the minute question The investors. obviously, I big that call, -- asked Thanks. -- And to on FlexSteel this getting we're

another think of the me competition. on versus FlexSteel big be their useful to differentiation just get I for of it'd kind summary So,

Scott Bender

to do Steve, you that? want take

Steve Tadlock

Sure. to else. wellhead do and Yes, service they have customer it interactions of in comes Cactus just everybody what a I they a better really, is our in think side lot the so of a on than down mind, executing the and which special, product makes superior job

at look that product, you composite formulation the sort When only of their spoolable the utilizes steel. of the they're

has worry worry the my others really to enough less And that that to experience, because problems, less lack. customers things a just it in in robustness there got about, out they've So, about value the field.

Steve Gengaro

one efficiency, to customer customer? prop value of to savings, we about benefit think ultimate should the of the the sort maintenance? the sort cost of How Is less

Steve Tadlock

Yes, it's really multifold.

get benefit getting online faster. cost a installation, the What more of You aspects? other in terms rapid some wells are of

Scott Bender

product handles This pressures. higher

So, a larger much it has addressable market.

Steve Tadlock

diameters Larger offered.

Scott Bender

Larger diameter, which that wellhead. the or of be choke downstream used means further it can the

has the exposure it market. So, greater to

Steve Tadlock

less You do have well steel maintenance versus as corrosion.

Scott Bender

It's had or not a product, aramid the it's I since of It's fact that introduced the fiber. and zero they function failures fuel fiberglass think that's steel.

And still you join so, it. to have

-- it's put on to have plastic. steel lot imagine it's couple And or this You to steel, steel of couplings can a you to ultimately couplings better product. and to steel

Steve Gengaro

ask Great. when or this around Thank equity The raise you FlexSteel. our could deleverage very one quickly. you. mean the you And -- deal the you deal, I I announced when more did thing can if suggested math

that that need equity. us just you're and do at to tell flexibility? curious wanted thought necessarily you And that. does potentially on the didn't there's I maybe more that to financial the behind looking You was trying And

Steve Tadlock

with grow been over time and and like balance FlexSteel. date, the cash with let in that saw debt, right, gave sheet balance by our to no an think we strength the rewarded Stephen. to we We've certainly I us having that's one opportunity the

some options having or but other be we it's when mind doesn't had flexibility there in mean imminent it the something is now, raise. provide there's out M&A to because that those the so, we And would that's certainly that did that equity trades necessarily right

Scott Bender

And it's definitely on to our summarize minds. it,

Steve Gengaro

Great.

all Okay. Appreciate for Thank the it. you color.

Operator

call Thank John the you. closing Fitzgerald I'd like to back for now turn to remarks.

John Fitzgerald

look We quarter's with appreciate you Cactus on forward call. the everyone's and speaking in earnings interest next to

Scott Bender

a great day. Have everybody. Thanks

Operator

conference. your disconnect. This the conclude does program for in today's may and participation you you Thank now

Cactus (WHD) 23 Feb 232022 Q4 Earnings call transcript