Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and thank you for standing by. Welcome to the Cactus Q1, 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions]. today’s being that advised be conference recorded. is Please

Alan. hand over Director to would go Corporate now speaker conference to like ahead, Please Relations. Boyd, I your the today, and Investor Development of Alan

Alan Boyd

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

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

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

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

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

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

that, I’ll With turn the Scott. call to over

Scott Bender

Thanks, and to morning Alan, everyone. good

investment Relations. the working an want morning, our Development take background from to this as at Alan Investor regarding I as us drilling this acknowledge quarter, the comments to from Alan team. engineer extensive of management to ExxonMobil. Halliburton a our Boyd, some joined has Corporate ranging to commence changes we who and banking Before has Director introduction opportunity provided

forward John our a our we new team, his taking in success to look be leading is to efforts, for company, a CFO of like of Investor He it over public from as role. matured Relations FlexSteel. I’d entire as to his will John behalf continued On thank moving over and serve as who function

We The have and closed past quarter months the FlexSteel few business. been our Cactus. from during include for one quarter, contribution active acquisition reported results the here announced and at of month FlexSteel’s incredibly the

for and in once EBITDA On a again rental as detail, high. records product, U.S. basis, adjusted would quarterly share service. hit all-time revenue Cactus wellhead have discussing set through Consistent walk past, the both results Cactus market stand-alone and field an we’ll with

On report how a that and Spoolable the go-forward as around the results we segment structure to continue particularly a Pressure segment basis, and to corporate we SG&A. the as Technologies intend in future. Cactus reporting reflect evaluate will guidance report FlexSteel will will Note legacy Control our we

a of for highlights were revenue Some quarterly XX% paid was million, first adjusted a adjusted wellhead margins record million, market $XX XX%, share include, of per we $XXX and of dividend the $X.XX quarter EBITDA nearly EBITDA share.

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

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

Stephen Tadlock

Thank you.

product Control were QX of by Pressure up sequentially, primarily total million X% $XXX revenues in driven one million, increase includes FlexSteel of followed. revenues mentioned, month Scott which results. rigs $XXX As were an

by land Despite period. This the customers. rig publicly followed our our Gross down during X%. our sequentially larger XX.X% increased to share margins, product was increase was points decline due depreciation market This Pressure expense wellhead in mix. basis U.S. the XX%. approximately U.S. overall inclusive XX traded product of part business, driven rose to rigs In in were by count, Control the

margins a decline quarter. redeployment-related million revenue particularly in The operations, versus higher QX, which Gross our private Control costs. fourth XXX from lower to were Our remained were basis rigs followed due fourth driven with Australian X% points the quarter. to by relatively flat XX% down rental was revenues slight had versus Pressure operators the quarter. strong down fourth $XX

Control service during sequentially. in the This above up expectations. QX quarter, revenues slightly combined represented $XX revenues X% were approximately product million, approximately and Pressure other Control rental-related field and Pressure XX% of

of basis related points were XX flat expense despite in SG&A sequentially as QX. labor Control XX%, quarter, $X.X focus. expenses, expenses the $XX.X a increased Gross and which higher margins, key due million remains inclusive during were down million Pressure depreciation costs to totaled sequentially retention transaction relatively fees

of X% Pressure million, an expenses, adjusted revenue. Excluding EBITDA Control was was of these million, representing approximately Pressure increase $X.X transaction-related $XX Control Pressure SG&A sequentially. approximately $XX Control million

first acquisition the quarter As a results closed the of on one FlexSteel the XX, approximately ownership February include so month reminder, we business.

is Given FlexSteel’s strong in and revenue. lower $XX a with QX. QX finish QX to March a seasonally completion extent had of often in activity to million orientation, lesser

Operating burdened to segment acquired also is income of during the adjustments inventory. was purchase inclusive of million, at non-cash in period by FlexSteel. our $X.X Technologies expenses with related $X.X million SG&A associated price Operating income Spoolable charges

amortization $X.X asset during income intangible costs included operating period. of Additionally, million the

which XX.X%. Technologies backs Spoolable out during stock-based an charges, $XX.X well compensation noncash the EBITDA, as to million adjusted as equates month, was EBITDA segment these expense, which adjusted margin of

at company a adjusted was up similar $XX nearly the EBITDA XX% XX% total fourth first was million, fourth during Adjusted for million from quarter quarter. EBITDA On the to of quarter. the $XX basis, quarter revenues

compensation, to that during and first cost fees EBITDA sold related of included approximately increased Adjustments non-cash in Technologies in $X and goods aforementioned inventory quarter related [inaudible] the the accounting XXXX expenses period. purchase during million transaction million step to $X up Spoolable total the of company related

the TRA We also million gain a backed $X.X revaluation out the from of liability.

expense was for million assets booked expense to related accounting. intangible our quarter Pressure associated which segment amortization amortization $X Spoolable expense with second again the purchase as and $XX expected be $X million associated amortization part Total Control million is depreciation during of and is million, Technologies. which first and approximately of Depreciation $XX of $XX includes quarter with the million, to

$X expense million during $X an million is total amount intangible to million amortization half at the of or estimated for expected XXXX Technologies of with per Spoolable decline within thereafter, amortization inclusive expected quarter. quarter. is the approximately second This Intangible expense of figure $X the

during million. income was Net the interest first approximately quarter $X

interest expense $X the quarter. a was expect of quarter $X related to during a first Tax release during We reduced than was due to million Income our expense allowance. benefit the expense tax million. second valuation of less

we quarter, in first A the QX, ownership changes Barring XX% the or public and the effective expect approximately XX%. XXXX. XX% Class ownership averaged for an During public ended quarter tax further company rate at the of our percentage, of

lower $XX and related higher was million XXXX GAAP We million $X.XX net at non-cash the to net to prefer revaluation liability. per which $XX XXXX. quarter other tax $XX share, in adjusted versus TRA during first of XXXX. per QX, respectively versus earnings driven during quarter share million and fourth income the income expense and income look by million $XX QX, of and in per income the The share, was our increase $X.XX were

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

the gross debt has June. approved million, We quarter, in a bank including cash with dividend first paid of $XX we resulting million and million of of Since Board generate also share $XX the dividend quarter and off of term have flow. outflow cash $X free a the to end business continues million. of loan per a ended $XXX $X.XX members. share, The During approximately of to cash related of quarterly paid the distributions balance in the balance, per quarter, to paid $X.XX the a we be strong

approximately The the the the property unchanged Control CapEx Net CapEx outlook during for domestic purchase a Pressure XXXX. $XX business first quarter was remains period. XXXX. for This of previously million during for the million $X of leased approximately included

to expenditure With the our $XX the of $XX full to capital year have we million. FlexSteel revised budget addition million business,

I’ll now over That covers financial Scott. to the review. the call turn And

Scott Bender

Thanks, now our on I’ll expectations second reporting segments. new based Steve. our quarter on for the touch

down Control rig quarter we in second versus in beyond single as expect may the the Pressure digits the $XXX percentage first basins. low revenue the to quarter, activity regions extend weighted to reported softness be gas in the well million During wise

period resiliency We during expect, the wellhead however to more in equipment. relative sales production

gain to second to rig should declines. industry on timing depending business, average frac activity releases. quarter, indications rental exit of to the sequentially drop an X% partially QX in in overall we’re which some exit, Cactus’ X% in to share the onshore expecting count. From rig point on rig expect QX we to Additionally, our XX% activity Customer offset market X% down our

on Note officially new legacy one to segment. are the that publish go-forward structure given combine a not we will Cactus into market our planning that business lines reporting share basis,

the region. to various highlights expect shipments we we During into following product traction Europe an locations. in make to gain the additional award quarter, continue the in international second This

pant inclusive the and region, expansion we trials for follow. with be in XX% in XX% continue expenses. the SG&A Pressure second testing to in efforts to XXXX are structures work our of to margins goal Adjusted and Mideast, Pressure approvals remain for evaluate the EBITDA segment Control expected our general to Regarding ownership and Control’s the quarter, corporate

expense within transaction-related to segment during approximately of as the Control EBITDA our for expected fees adjusted guidance the as well second $X.X depreciation be $X expenses. stock-based Pressure expense quarter This excludes million is and comp segment Total million.

segment. to Switching our Technologies Spoolable over

to XX% second $XXX revenue achieved the expect acquisition increase the This first the versus total, to product the full diversification million We with the quarter, of close. including acquisition. prior benefits $XXX two an XX% during the quarter approximately highlights to the of months of million

[ph] and competing remains technologies stick unique FlexSteel’s as to for demand pipe FlexSteel products. steel replace continues Customer robust

margins Technologies cost working some the As on we EBITDA inventory previously of and quarter, XX% QX. for adjusted through the first expect this us, the to Spoolable XX% between behind disclosed, headwind segment with majority during our segment increase higher to was

anticipated the and be margin impact accounting, the purchase associated on Note inventory value half guidance XXXX. with that from $XX step-up million which $X QX second of million in of is and this excludes approximately to the the hand for non-cash

Spoolable stock-based $X.X expect in million. our to Technologies segment be approximately We comp

select confident we’ve Spoolable opportunity as customers, this that last had further trend the we success. and the month, legacy we’ve During will showcase additional had the Technologies I’m already technology clients. introduce Cactus continue to to FlexSteel’s superior to

to the go-forward move Cactus, accounts on there basis. large with that more can potential add needle is As a

strong further cash structure, strategies. profile The wide set company hope year cash team down a Looking for net evaluate We forward, the to return continued the we’re opportunity of capital excited business. which debt. and enable return enable to to the generate rapidly should year management this flow margin this combined to position the pay capital free about will

today shape in business our balance to activity, expect they With expected in outperform commodity pressure to remain the we in domestic much sheets the while better land activity. prices commodity is pullback general in than Customer prices, recent recent pullback industry have past. years domestic

remains positioned deliver shareholders well the our to market current amid for Cactus environment.

to want I Team in Management Cactus Finally, herculean company. Advisers FlexSteel personally and for thank to their our a transitioning efforts

the I’ll so with back And we operator, turn that, may over begin it Q&A. to Operator.

Operator

[Operator you. Thank Instructions].

Dave Dave. first from will Barclays. Our Anderson question Go come ahead with

Dave Anderson

Good Hi. you? Scott, Thank are you much. morning very how

Scott Bender

you? are How David. Hey

Dave Anderson

great. doing I’m

count just reflection at said, E&P little beyond wondering the what back bit You on heard if I pulling We could larger a that rig basin. oil is you’re private, gas really a the the lower majors think seeing? on really more. was that or haven’t the is weakness of you all. the expand prices extending you that Is

market what’s and just also kind of you think kind of quarter, year? its rest see kind you just gas the how the those of sense of Do Obviously know. plateau wouldn’t maybe bases the shifting for your in wondering back if own of customer broader of is was you if second don’t but thing, talk of could on the kind you thoughts half I its the the second or about your on maybe mind. quarter year sort I

Scott Bender

easy such Dave, ask you always questions.

the just stands shareholders, beyond prices, our don’t with but So, pullback although their our into help to any customers evidence, customers gas lower objective extend I I for are translates flow and it that focused on will let returns lower me to reason have that think, say private. can’t that because that cash so

totally will you as more the affected So immune think sure, the from public. to the know, don’t I privates think be than public But the be to pullback. are be I all going

supply. that $XX, on public we I addition extent going morning, look has to to cuts though, think private, but have to didn’t think tightening some when cuts, to you’ll also be their low well. OPEC at evaluate that the outsized opportunity to actually and impact I in XX’s, this I to probably another is see oil that, of recognize an got as production that but that supportive production $XX, has on are have

not the the David, in end have bottom I that the that Looking, could quarter. been possibly the I rigs other of – could the that’s enjoy bottom I than XXX evidence of objective out in towards is terrible so now very I – think I not having think see if for XX going is would returns range And second themselves area. think to that be to sentiment We And very don’t although think they this good long. business that rig XXX, know count think supportive, going I you that. any exactly another could it’s don’t that that only But level. below a fall right think kidding but to certainly we’re you know at everybody I sort pullback. of it’s

Dave Anderson

that here. could about just a to well think give little you today with obviously, for asking me Some overlap wisdom the or the here, then into kind very a FlexSteel in be to – of needed I’m maybe is going FlexSteel your FlexSteel? business In markets, can that’s – acquisition I go a opportunities. could sense If you currently but over bit of one your wellheads a wellhead of for not other lot I today shift just the words, talk number,

the exposure the for selling can of the installation kind you customers. work? see customer. of be that you a we’ve had terms with of reducing time but same the are that to today, think how of How kind in talk is it’s people? to – you are about would same to person really of Obviously much the you E&P, point there talking – I an does same historically. forward talking an is that just on a business lot moving would overlap Not and But

Scott Bender

a want ultimately buys make from or pipe Okay, or so with production stick is Cactus Dave, Shawcor buy I at who or the point to NOV to or everybody first product from competitive that FlexSteel from like FlexSteel has tree, a Baker. product

some of from to sort the transmission So everybody’s run [inaudible]. of line got end

of major we Cactus they also In look terms customers the customers, FlexSteel’s if customers. U.S., are at in Cactus

number about the of that, said FlexSteel. has having So as Cactus Xx customers

size the to So we’re we to taking for FlexSteel something, customers. expand our they’ve that this introduce customers help product you those to line got opportunity so to Does buy think those logical and knowing all? it’s wallet that at

Dave Anderson

more kind I ton. but the a in pricing? question. just guess helps how does prices a conversations steel driver of a but it That could the in Are kind sort What don’t like I here? of come know drivers about? work typically how one Kind about I are if squeeze ton just how do Just of FlexSteel, of the OCTG? is loosely, interworking’s pricing of of

Scott Bender

to let TS comments. I’m going is with TS us. his offer .

safety best the And sort large primarily pricing on quality, are why also to and as providing So well our in products privates. customer. the the know is of customer a to in Cactus the of in of customers terms products, have pricing, we the similar sell We intention you business. FlexSteel we regard with legacy value Cactus set base and similar as that’s amongst very overlap that in and

Although customers like said, to we to of grow to line. have top introduced Scott our lots Cactus legacy get opportunities

Scott Bender

a of prices, component steel fair, nature way large just the expand input. let me been an David, this that. be is sort a modest has they’ve is without product towards by TS steel clearly marketed steel but But upon To eye prices. their So person, of

with when that not beginning in FlexSteel course means Ukraine, respond product of prices in prices. went increases commensurate war crazy, their did that steel the So with

of on their cost don’t steel. base they their price So selling

Dave Anderson

it. very I thank appreciate Okay, you much.

Scott Bender

Thank you, David.

Operator

[Operator next Instructions] question from with comes Hallead Benchmark. you. Kurt Our Thank

Kurt Hallead

Hey! morning everybody. Good

Scott Bender

you? Good morning Kurt. How are

Kurt Hallead

perspective Doing all think well, doing to outlook much. well. evolve. how the appreciate going Thank and you the providing so I Great! and things you commentary are around

incrementally everybody’s think the of helpful. I business grappled of it’s kind all so now, around right elements

a with the my that’s a But are I the what you’ve know kind sounds opportunity of of some runway a the curious to momentum and I away looked you that the kind leverage question hold just still base. to So it unfolding, like to front kind doing, year FlexSteel significant to seeing that of on customer you what you to here extent overcome can? Scott, FlexSteel think know. maybe some obviously you uptick. at of understanding also is, Xx grow you probably know guess, been to lot see it international and as hurdles into real business of see the lot you international have may you of got

Scott Bender

product both You’re hurdles in talking or... lines about

Kurt Hallead

Well, yes, yes.

know Just maybe foray. your this I again. is not first overall

international does customers to you do try You’re right But see kind right. to and feel as to get reception now feedback you of an internationally? getting expanding and from pipeline, there’s kind be in to that the business, roadblocks to your the of wanted I be the how any sense might what and business you building you just think going happening a make

Scott Bender

know towards on You the done than take customers. do similar and and better as have care world they international back the job challenges, They be you try a that terms it’s you Cactus off not countries think countries markets. historically requirements. that those to you we when their indigenous but appropriate, focus the their chain I just logical And roadblock of has The had may commitment domestic the adjust. that while is And has, think much during of U.S. It manufacturing remains logical. to as it’s had supply commitment by domestic that your a FlexSteel that, in internationally market such now frankly, think of require I I know FlexSteel’s doesn’t those major attention rest turned are. which

be to projects for to manufacturing international us to extent. so approach that as we marketing of efforts, and an particular, FlexSteel couldn’t disruptive result, big in the fortunately a and process Cactus than can sort more together Cactus really FlexSteel projects their chase projects, so For for the issue not the is international international and take same Capital to our market. combining are they

be with getting interest. of on we’ll a single the in in calling hopes individual So of markets customers many some

whereas To are mostly they facility purchasers are engineers. engineers, the completion drilling side our mostly side fair, on be FlexSteel on and

set even So different companies, makers. of though same decision

of now have lack right the exposure. roadblocks So just been a major

And so There’s plus up in Historically There no international, internationally. XX% where is to reason begin that. as year, business. efforts international ask had me was reason. this yes, structural question we our ramp to a you’ve of years no why can’t we return your

grow to especially and add I’d offshore going asymmetric in FlexSteel, for markets, will to I’d has expect really Yes, big the a segment, growth say, benefit – in say notes shallow of any be to that international offshore segments. kind we’re in got because that just water to upside those FlexSteel the

Kurt Hallead

Yeah, for thank it. it me. I That’s appreciate you.

Operator

would [Operator remarks. to Boyd your Instructions] Thank back Alan everybody you for closing like participation. for over to now turn I it

Alan Boyd

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

Operator

participation your the today’s in for conference you Thank call. This concludes program.

may now disconnect. You

Cactus (WHD) 9 May 232023 Q1 Earnings call transcript