WHD - Earnings call transcript Q3 2024

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Operator

Good day, and thank you for standing by. Welcome to the Cactus Q3 2024 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 first speaker today, John Fitzgerald. Please go ahead.

John Fitzgerald

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

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

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

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

Scott Bender

land I'm Thanks, business our segments. quarter everyone. and activity, the John, the good our company of morning decline third total sequentially both of during Despite U.S. pleased third unique in report to rig to revenue results, quarter. continued resilience which improved highlighted the

quarterly segment record Technologie reported revenue. Spoolable Our

decline activity we on most noted the that was domestic us. I quarter's behind call, expected As last of

played throughout largely out anticipated, as While continued quarter. softer the third that activity has

commitment our execution market be continue to to this of led outperformance. very subdued to proud associates' of the record consistent I customer conditions, that's Given ongoing

revenue call to detail. I'll XX.X%, to our million, margin Jay turn Some the CFO, who our of third EBITDA we million, our $XXX EBITDA over financial and now total balance $XXX more highlights adjusted million. in of adjusted will review of $XXX increased include company quarter cash Nutt, results

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

Jay Nutt

morning. Good

As sequentially. were EBITDA quarter, million sequentially. in adjusted of resulting of another X% was which up $XXX revenues we mentioned, million, Total down Scott $XXX total had solid X% QX

driven For EBITDA decreasing margins reserves or and income benefited as sequentially, $XXX by The revenues the claims. Pressure shipments our $X.X Control miscellaneous incurred connection by of with points charges litigation noted. extent were Adjusted repeat million the points. with same decreased basis XXX decreasing X.X% segment, quarter, basis or didn't in million, reasons to quarter equipment $X.X production X.X% XXX this down decreased operating operating the decline just period. Operating margin was that for including second during X.X% sequentially, sequentially, million, bankruptcies of the unforecasted in taken segment in other customer with margins

sequentially, QX, adjusted primarily related flat of earn-out the FlexSteel liability higher liability FlexSteel the On acquisition, which quarter. resilient Excluding $X EBITDA quarter charges FlexSteel up points, pursuit XXX EBITDA segment was out evaluation million $X.X expense million. for margins compared the growth full by company $XX.X related with include lower EBITDA X.X% $XX increased a decreased we're the activity. basis growth million stock-based Adjusted while in input Note a margin of from assets amortization result EBITDA million the charge fees settlement, resulting $X.X sequentially. the of at final for essentially third second amortization for and largely third quarter XX.X% from cost. Corporate EBITDA input intangible other increased expenses was that costs. acquisition. as that of to to due adjusted domestic inorganic company flat up adjusted Technologies remeasurement was earn-out the booked sequentially, no pursuing. were during compensation, closed quarter. associated $X.X was sequentially, Adjusted resulting million quarter some the was the includes professional quarter. In paid fees quarter and of to revenues customer Operating to to resulting associated $X.X $X.X margins second the an with and remeasurement in million with due liability in sequentially were the from opportunity third of Spoolable were our Depreciation the flat versus the aforementioned third offset to segment, noncash Adjustments million $XXX,XXX income opportunity. the and the $XXX the associated was earn-out charges, inorganic professional the upon for by expense segment total million, XX.X% Adjusted expense an longer EBITDA basis, of total million during

at During the the the The million quarterly in in and versus million, income share, income $XX of small third $X.XX primarily $XX rate XX% tax to were $XX during FlexSteel the $XX incurred million fees net per to expense third second quarter, and was the the was professional income compared liability. applied quarter. income the the per pretax A third XX%. net earnings ended respectively, period during XX%. GAAP an for corporate, the a share changes net averaged income. of quarter. net the and decline of was quarter by Adjusted tax adjusted $X.XX share by quarter second effective our earn-out reflecting or of driven offset million public Book Class at the remeasurement the ownership $XX slight quarter company mostly Adjusted rate per in and million was tax

per we approximately in of $XX members. a outflow During including distributions cash the of share, to a quarter, resulting paid $X.XX dividend million, related

and associated close and distributions. Due interest FlexSteel capital is payment Additionally, continued fourth $XXX associated was a spending the balance million, quarter notwithstanding to $XX This equivalents cash TRA our we outlook. quarter. our moment, the deferred million The was our paid $XX Scott by operating during liability to disciplined we approximately payments, $XX.X final and Capital excluding cash operational the residual million cash management, to give earn-out working third will with we million. quarter. In the the and strong aforementioned quarter balance million, you XXXX fourth liability. the closed with $X.X a payment accrued increased of earnings

segment additional rate third Some tax effective expense similar XX% the looking Spoolable fourth amortization and Technologies. depreciation and adjusted the including $X.X $X.X financial million to $XX Total expected rate associated Control XX%. considerations million, an million the quarter EPS is Pressure ahead fourth be during with and to in our with to approximately of quarter, when tax estimated rate of for quarter

and international has year range in expansion million full due outlook reduced timing be equipment been our $XX million CapEx Our to to of the the XXXX of receipts efforts. $XX to

turn Board and review to dividend of now a I the will share, and has December. That Scott. call Finally, $X.XX back which the per financial paid over outlook, approved will quarterly be covers the in

Scott Bender

quarter production drilling segment. lower revenue customer are the third factors, in quarter visibility factors mid-single-digit equipment Thanks, October, average the into around now upon shipments exhaustion. including budget activity touch for U.S. seasonal Pressure and for resulting we Jay. year-end. due These combination revenue preliminary I'll potential Control to less expect land on to of by expectations versus dip fourth reporting a our Based operational the reflect

comp EBITDA consolidations, discussions segment the the in ongoing Although expense XX% indicate in diversification year. Adjusted anticipated We impact customers preliminary with and activity approximately the early of cost expected will efficiencies as EBITDA fourth as quarter half lower ongoing revenue our we increases of current cost are supply offset product during the for our expected are to as within to the second to closely of impacts well to next improvements segment. Pressure our excludes monitoring guidance part be The XX% of adjusted due are operator margins efficiency million believe XXXX the stock-based costs potential management chain Control efforts. decline. the of trend $X

our we mid- quarter-over-quarter. Technologies expect Regarding fourth high-single in digits to revenue be quarter to the Spoolable down segment,

reminder, are uncommon. the seasonal in XX% fourth declines during business approaching As this quarter not a

higher $X in drivers QX, with progression. segment are of costs the material which been expectations. costs, through excludes are operating third XX% comp We the stock-based expect material margins increased the be ongoing result partially approximately easing. to primary segment. margin spot before this expected combined address adjusted QX, These demand prior in to year-end that impacted in higher EBITDA million The quarter to higher leverage results of some of increases XX% to have the during the purchases persist QX expected Lower cost to relative in material

QX, initiative, margins to to forward expanding of supply Adjusted year. Control XXXX. charge points corporate of approximately look be our is in which in products $X.X of segment supply this million chain of XXX chain source $X million in certain end basis the excludes we expected comp. by improvements, the Pressure stock-based combination next of in approximately with to by using improve a the FlexSteel Additionally, components EBITDA over This could benefits

focused evaluating to a expansion strategic continue our opportunities. we international Regarding approach establishing Mideast take business, disciplined and to on a plans, we'll remain

dedicate to in continue both We significant resources segments.

of our date, doubled XXXX's performance. to international As for full-year in Technologies Spoolable success an example XXXX already revenue has

times pleased challenging, our with be to and latest Cactus, generation to services, market high-return very safety positioning enhancing high-margin, the commitment while enable optimistic to our I portfolio continues out and our of U.S. exceed I'm drilling of and our the expectations. to the to organization eager customer responsibly While reduced roll and customers system market remain to them products reliability. of achieve wellhead

and continued of costs. In we next profile in supported availability increases meaningful I'll enhance complete manufacturing design, the may over our operator, customer we the for the which our our that, increased maintenance new reduce segments, XXX of turn to our so objectives segments. And non-Section from by will facility summary, In wellhead it new chain, next-generation cost remain will products expansion unchanged our and risk additions, supply valve frac significantly and to international the Q&A. Operator? within our primary and of addition, both services include for with back of system, base both new begin contributions and introduction year prototype customer testing

Operator

comes Securities Instructions] of LLC. J.P. [Operator Our Morgan the line from Arun of Jayaram question first

Arun Jayaram

about inorganic portfolio to to thoughts love going ask for hear obviously, wanted morning. portfolio? about really, I'd love overall to a a on I'd just augmenting an on, you thoughts thoughts Yes, how portfolio. to I'm level, interesting pursued has this which opportunity. the high your growth quickly, successful. thinking But Obviously, get a spoolables, grace strategically you really, and on really really your maybe had you've acquisition hear just little been the are with your at I

Scott Bender

only your That's question? Okay.

Arun Jayaram

I have a follow-up.

Scott Bender

Okay. my normal. than snarkier medication. How a I question? have I've do you haven't a I follow-up when little answered I'm you know changed this guess

Okay.

I've think would objective I with always be that primary consistent international. our So, before, what said

advantage take would However, should opportunity we another that. looking FlexSteel of itself, presents

We have the sheet. balance

that. know You

have We us $XXX million our the that [indiscernible], -- payment in what, they've already $XXX I given we capacity the earn-out back And of about line when credit. after of think John, FlexSteel terms even million. $XXX paid million,

So of I'd international shareholders But opportunity that and terms looking primarily, be focus it value for would that. be I an would foolish at our on. in not

Arun Jayaram

about Understood. just that. is your one going to about base a And thinking base. days from risk election, just does you that to And through the We're that manufacturing has and It wanted you're about lot to going the appear who candidates general just not your on talk ask how get away China. Cactus, win. just general current third question. I But mitigating separate that production that the U.S. between risk a your just to you're think given to I'm and But for of comment expansion talked maybe thoughts a tariffs. and you

Scott Bender

our of takes we're Yes. I point. would say position City about because Bossier what that of we That's best of the we the all half competitors, produce. in have that of first care

know. disproportionately to numbers I've to as imports I them point tariffs China? is, as goods, be applies. where Will of XX%. obviously import heard Trump China will tariffs XXX%, they from of be apply going high The really everywhere. second is President every goods The competitors applied I've say heard big he's question -- increases we've our Section don't heard most XXX one and

advantage. he's competitors, say tremendous that she pushback. wanted that and going coupled this of think think competitive in heard I our Bossier end is XXX% right making to And the gives that year, we've move a to FlexSteel City, now, that significant next mind complete by be with us keep that of get that increase even tariffs. I Kamala all we're And will Of U.S.

Arun Jayaram

Yes.

You right? make product? in that Baytown, That

Scott Bender

Yes.

Arun Jayaram

Okay.

Scott Bender

But business. short in I anyway, we're of is, know position the answer anybody think best in I this

Operator

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

Scott Gruber

question. Arun's I follow-up a wanted ask to to

interest another continued pursuing free acquisitions, cash your but mentioned cash but in keeps strong help after notice You quarter. that balance I rising can't

you grow to of and cash expectation the consider cash of Or you'd returning Just balance you'll pursue deployment. your should shareholders? be at So on some thoughts continue latest level as acquisitions? the which is that cash a there to it balance

Scott Bender

a That's question, good Scott.

We have too much cash.

pursuing if interested expansion, cash this already. actively in some weren't So I we have would returned

So all looking know, capital we actually be told our like to also the by there right you of to end suggest when debt. year, asked of our I things. coming the I by would patient that is have, because this an at aversion But that We some the not a I growing optimal before, year, we cash now. were would if increase when shareholders. be do point a you to -- Scott, you end about time, tremendous the I of patient were very return we have you There'll nothing in the structure amount occurs and cash balance, frankly,

Scott Gruber

by And to just that's end of Right. be the 'XX, clear.

You it for can a let few more build quarters.

Scott Bender

Yes.

Scott Gruber

Okay.

Scott Bender

Yes.

Scott Gruber

on well. a the facility would you some provide just then an system just there update Seems timing as bit, to to qualified a building getting And wellhead process great in but that there? East. your and be Middle of color the be Can on push right a follow-up

Scott Bender

Okay.

that think the the don't our I frankly, I decision limiting factor. continuing to testing. go. that about direction going And that the think, is we're testing we're It's

the about so, And worry I wouldn't former.

that I taken this had speed We full just, ever get But, going but charge. incredibly intend we impairment get this survived all done have alternatives. proud ever ahead. I'm an than to us having to impairment don't longer it's has to it I to going this several an It's of cautious very by And people. are, and in expected, way very nature, Scott, have charge, We're we're way. a responsible take take we done. without

to with me, you. tell to Scott. us, now. never to I'm going to because I'm bear lie just lied So you, not going I've you trust

Operator

line Gengaro the from comes with question of next Our Stephen Stifel.

Stephen Gengaro

we U.S. much I a I have in dynamics the perspective much in products business of think about pricing, cycles from your Have consolidation like conversation with about your perspective and when we the seen one, what in from the feels first the change versus periods? customers see they think and changed. peers don't and versus know to changed prior world view you high-performance how versus either prior the love or has utilize talk pricing? soft just general, your but you

Scott Bender

to to in X -- before. I've do going the because I when remember I comment expected -- Yes, spoken operators remember there this this left be Sheffield or he made used about laugh. We're to only Scott about -- see Permian? you so

Stephen Gengaro

Yes.

Scott Bender

comes the might possible. I I still of controlled of market And believe I supply seen is I've ever handful This And possible? of percentage their for their of whiz, just thought, grading Well, think is majors. it's do gee net believe us. a is and that. that supply that by don't high-grading positive a But now chain we that first high time a serious the I a chain large see with that

wellhead I think providers technical that of have more struggle. of we're relationship the are competitors time host very means that are buying smaller small going independent from time difficult And a to to moving our some that much going to buying. this because

say when buys doesn't So with XX. I think while at up me with it you've XX before, that heard B XX, company rigs end A company

terms of would us. this think think well bode still I that's do But market that I true. in share, for

Stephen Gengaro

year? about we flattish indication increases EBITDA customers some quite what Cactus I'm softness, for next quarter count do next yet. when 'XX from you in a fourth go levels, have about laid you -- follow-up, early some is you think this of But my said you out But and rig of growth here and not kind if maybe deliver think can you to sure want year. small I think flattish modest think And the in current that maybe

Scott Bender

Yes.

Stephen Gengaro

we That's model. good. Okay, how

I'm So that. glad said you

Operator

Barclays. question from David of the next with comes Anderson line Our

John Anderson

level in sales second per in Control. on quarter So of a the rig Pressure question the

they're You lower bit higher little that and were moves just and highlighted expand about relative you would think a stay revise would quarter. how bit they to pretty demand Can going down? the I how to much wellhead up fourth a more in rigs consistent.

just So overly function a little function there's is customers of just rest [ in rest business? a a on that site? your XQ. kiln of more just it just, utilization Is the ] cautious bit your you as And really of of of on the a the shift said,

Scott Bender

is. production And so really difficult it the by call-offs. primarily are David, to It's Yes, they predict. impacted tree

So we number really they production per a a and they production then of take primary driver large go change that's the of for revenue see then trees, quantity the quiet, customers large trees, take in rig.

John Anderson

the So at to in tariff hypothetical time going question. looking happened this back 'XX. model getting back I was That over and

natural capacity you same Do you hey, your in do you so Would the substantially. per 'XX went provide Do ramp and or bit customer, I this manufacturing up increases out, a don't U.S. can this and like you? again memory here. you're manufacturing you different? I you my to And function, my anything just necessarily your versus can I'm refresh happen guess the 'XX, a can the in think making and maybe thinking did this I therefore, in just question your thing revenue expanding lower -- up a remember little is, don't share the is So rig U.S. faster? cost like. back, And you remember time?

Scott Bender

it U.S.? ramp faster would we in Are you asking up me if the

John Anderson

would it just natural a different last time? of transitions. is And the have yes, anything done how function this Or Well, right. you

substantially to 'XX, up the a went much and in others. 'XX your product at that versus revenue back per contributed with and looking going just people to I'm just it I'm the wondering how tariffs they rig basis. on numbers of So

Scott Bender

Yes, impact costs had I because lower they don't think really much domestically. are importing than tariffs, tariffs our are even with that the producing

think issue. I really that's an don't So

remember think it, of if have couple that period helped. don't X was X, I an a What what which a did was period. I There was exclusion, was issue you a a know tariff really Joel, that brief we months? that.

Joel Bender

Little bit longer that. than

Scott Bender

How long was it?

Joel Bender

it to think it. on XX -- say, I was been decent months. have think a I run a We it for while I to want might had XX

Scott Bender

that it think was long. didn't I

Joel Bender

Yes.

Scott Bender

So tariff big impact a had the exclusion there.

John Anderson

Okay.

Scott Bender

would But differently? -- that I think I manufacturing we think far addressed. out And low-cost source. getting to strongly in of believe what addressed. I done I very just a can't coming geopolitical the have in still very right got are now China have that believe along risk I be strongly

Operator

question of Jeff from line TPH. with next comes Our LeBlanc the

Jeffrey LeBlanc

the guess be then international moving wanted could magnitude the I Technologies to also, baseload a just the question on future would which is Spoolable revenue forward? you of think should steady ask in about this as revenue? forward if we I quantify a international growth And moving

Scott Bender

Steve?

Stephen Tadlock

the on area as people hires, capacity expanding dedicating like for active international repurposing an We're of percent a focus And resources, spoolable And we international. that's both like service where in last that's to as additional year. it as as this yes, from coming Yes. double growth digits was us, well the view in organization that. high-single support over mentioned, to Scott some

Scott Bender

some could That's further because our very for we're I think we in could of think even business. this interject, just the be capacity a on I couple that years preliminary international lot. work expansion business if that, of FlexSteel XX% next to doing

Jeffrey LeBlanc

XX% or overall? XX% of of that Spoolables Is

Scott Bender

Spoolables. I'm talking about

Operator

turn concludes to remarks. back to I This it question-and-answer closing Fitzgerald session. now like John the for would

John Fitzgerald

you We with we on to appreciate us, Cactus. speaking next joining call. look quarter's and for interest your you Thank in forward

Operator

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

may now You disconnect.

Cactus (WHD) 31 Oct 242024 Q3 Earnings call transcript