WHD - Earnings call transcript Q4 2024

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Operator

Good day and thank you for standing by, and welcome to the Cactus Q4 2024 Earnings Call. [Operator Instructions] And please be advised that today's conference is being recorded.

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

Alan Boyd

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

us Chairman Scott Executive Chief Our Tadlock, Bender, CEO joining Will Officer; be Steel; our Chief our Steven Financial are and Bender, President; Also of our speakers will Steve Nutt, General Bender, Counsel. Chief Operating Joel Jay Officer; Officer. and Flex today Marsh, and

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

Forward-looking control. the statements advise discussed in a We with from to risk factors actual number of the of which materially risks many and expectations. are subject and listeners cause and to are These could differ filings current uncertainties, beyond our uncertainties review to our our results our SEC. release risks earnings

Any today's we publicly statements. of are date, obligation only or and review forward-looking as to make no forward-looking any update undertake statements today we

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

With the to call that, I will Scott. turn over

Scott Bender

everyone. Alan, good Thanks, and to morning

As to revenue earnings outpacing outperform, for business our and been year we levels the the the with full that activity past X. XXXX, performance industry have concluded for continued softening

and most base performance continues cost high-return and resilient oilfield the flexible make that low service of fixed organization's Our including one to demonstrate characteristics supply the Cactus businesses, a chain. inherent a

and products services. offering efficiency-enhancing engineered differentiated, cost relentless and Our and focus and safety, execution for customers, control our on highly

quarter cash fourth $XXX to margin quarterly our dividend segments to include solid with primarily both million. a per EBITDA and total of $X.XX paid the Fourth balance $XX we million, of adjusted adjusted company share due declines of million, EBITDA highlights XX.X%, despite We of finished increased revenue seasonality. we quarter in margins $XXX year performance

review near before our who financial Jay provide call for on the his lines I'll remarks, I'll the Nutt, thoughts results. over some term, the our following opening to for now And will CFO, Q&A. turn outlook our

Jay? So

Jay Nutt

Good morning.

total our which sequentially. mentioned, the performance QX $XX segment down not in was The than anticipated Spoolable Scott adjusted was As experienced were down in Total $XXX as the a of Technologies of through were was EBITDA bit revenue we stronger sustained guidance sequentially. the X.X% October X.X% revenues more million decline year. million, end

For $X.X anticipated. our operating the shipments by activity down Pressure in decreased of due incurred million Control driven the decreased lower XX nonrecurrence customer X.X% quarter, quarter. third reduced segment, primarily basis miscellaneous Operating charges X.X% were and income or the sequentially, million to as operating leverage during points equipment production of by revenues increasing with $XXX sequentially, offset of margins

with points decreased margins sequentially, or EBITDA to reasons segment noted. previously X.X% due by million basis XXX $X.X the Adjusted increased

$XX our Spoolable down levels were customer the due seasonally of quarter. For Technologies segment, sequentially in revenues the XX.X% million half lower of slow back activity to

and reduced XX.X% $X.X Operating to basis amortization costs of income sequentially, while $X leverage. or million segment ongoing decreasing basis decreased operating with XXX million margins $X.X XX.X% margins by million points by higher due decreased of or income XXX decreased Adjusted Operating some EBITDA inclusive sequentially, is input expense. operating intangible points.

incurred due Adjusted growth Corporate during the to million at EBITDA of to was expense. of $X.X QX in initiatives. down the million and Expenses were related sequentially $X.X third Other Corporate $X.X quarter million, flat nonrecurrence fees professional

related to company essentially the and of noncash $XX Adjustments in adjusted margin million, receivable gain quarter On EBITDA from million charge to of a XX.X%. flat the quarter EBITDA million compensation during the was company basis, agreement. revaluation down fourth during the total stock-based $XXX for X.X% EBITDA was third $X.X quarter. total a Adjusted $X.X quarter tax include million at

Depreciation to of assets related amortization -- million, including $XX resulting expense intangible quarter $X million and was amortization acquisition. tangible the for from expense the the FlexSteel

largely During company XX% income quarter GAAP the the income of million lower expense was driven resulting public million, was related an which the effective revenues fourth ended by the tax the during revaluation ownership $XX million TRA. averaged was quarter, Class the at during segments, $XX third XX%. the quarter quarter. gain tax XX%. rate of to both and versus A in the offset fourth the in the in The quarter of decrease Book $XX net or

$X.XX the million year third fourth full $XX adjusted to XXXX respectively, earnings per a of and Adjusted quarter. and tax and net income per were net versus net $X.XX share quarter and applied million rate our was share, Adjusted XX% income the income. pretax per in $XX share for

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

TRA taxes final the million XXXX cash associated the made the with during quarter. of $X.X also payment We

and income, quarterly material sales levels raw the year the in $XXX XXXX. cash quarterly anticipation half in to following with The bit due approximately a build of our million. business increase was million, Spoolable in second opportunities ended We inventory of a build lower in a part lower balance in cash little a than $XX of of missed of our several Technologies usual XXXX, cadence, robust

potential remained fourth elevated Control activities and implementation and balances possible due new as of regarding tariffs. uncertainty Pressure the quarters inventory Additionally, was increased through port third strike to inventory the

near of CapEx million was during provided $XX guidance midpoint CapEx quarter, October. and in approximately for year full the $XX our the million, approximately net was the

Scott will outlook. first quarter our operational you give moment, a In

when first tax rate an tax rate approximately at XX% considerations adjusted the XX%. an additional of effective quarter, and estimated of looking financial include, Some EPS for

tax Additionally, million we taxes. in related made estimated associated deferred and to XXXX a $XX that distributions approximately cash January of was payment federal

year. cash of deferral our was deferral fourth XXXX June Hurricane provisions after third IRS under benefited area last This This allowed Houston the balances. and affected in relief disaster Beryl quarter

for million Technologies. $XX.X quarter to our be first segment Total with expected is expense with Spoolable depreciation the amortization million in $X million, and associated Pressure Control and $X.X

the XXXX expectations range CapEx in to million $XX million. are year $XX full Our of

increased million at including The increase FlexSteel's improvements from together international costs. is diversification for efforts, tariff supply facility, $X originally with XXXX a due to chain investment Baytown manufacturing equipment that spending on chain in planned to upgrades, XXXX mitigate supply was inefficiency made January

dividend Finally, per approved the be quarterly which share, $X.XX Board a March. in paid has will of

This covers his comments the now to call the quarter over I'll for turn and the first back review, financial outlook. Scott about

Scott Bender

on the for touch expectations now quarter segment. by I'll Jay. first reporting our Thanks,

customer versus to levels the in to view with January expect million up on Pressure quarter. reported first expected be activity strong flat results the revenue of the $XXX end During the first modestly quarter, quarter. we fourth This to combination the based Control in increasing is

be for Adjusted segment. $X EBITDA excludes the adjusted This first to within of to margins million approximately XX% in expected quarter. EBITDA stock-based Pressure are XX% Control the segment our guidance expense comp

the U.S., But goods Section XXX the cost profile would the announced adjustments, will Chinese additional which our be imported As our I'm facility, making to facility. will chain to you the monitoring fluid, be that tariffs. particularly production at sorry, -- on into existing details recently believe from tariffs from by of are as incremental the U.S. we we tariff impact supply impacted The to this remain difficult expect, closely time, relate quantify. impact our they Chinese

impact expenses additional as U.S. These be origin. tariff applied the derivatives when all the will of to entire implemented regardless tariffs will and industry, of steel countries

equipment manufacturer largest manufacturing Bossier As is a our build U.S. that at currently we and industry's of facility City our of half the facility. XA equipment, reminder, API approximately

pleased expect API begin Vietnam. share obtain once before the placed the modest half our shipments of this to we new I'm in the location second is our facility quarter and that We orders up year production accreditation. first to facility from of XA ramping our the in low-cost back in

facility also of that current but our chain benefits supply our Chinese committed than facility, impacted demonstrating to combination our significantly diversification. at the a We remain be we the unique and this production of customers. production flexible rate by producer facilities ensure new will our tariffs, From a for believe lower delivering low-cost will understanding,

high be been seasonality, the to our to expect to the due extended as increase Spoolable revenue quarter quarter quarter Regarding our relative to mid- the has activity Technologies lowest slow fourth quarter were to of first first segment, customers we digits single the through down revenue Historically, January. year.

driver In first XXXX, primary orders the the in of international a were sequential increase quarter.

suggest building indications be a rebound February, early experiencing the is and quarters second, activity order XXXX will however, third that and are, We strong. customer activity in of in meaningful that

active will for which particularly year, a market will This our addressable increase in be service, we qualified most product international regions. HXS the introducing

offshore water shipped we expect and in mining continued fourth addition, customer and the areas. a shallow product we quarter, opportunities to in a these customer In

XXXX, increased shipments such midstream to to to customer and are major XXXX. in contributed grow expected shipments continue in Additionally, a to record our sales

international long-term our our continues to international achieving of expand list Finally, our confidence goal supports towards contribution. and revenue opportunity XX%

XX% decline. EBITDA comp Lower anticipated in approximately the in stock-based $X to XX% the leverage QX, expect of driver margins be primary to is for operating We excludes which margin segment. million the

in segment, XXX% is being chain direct are not do tariff still pipe although a we domestically impacts supply in Texas, the FlexSteel upstream manufactured coil, As expect this Baytown, so of cost using same reminder, impacts sourced determined.

which QX, be $X to establishing plans a Corporate of remain excludes a We've charge real on focused stock-based of Adjusted international approximately and made million our expected manner. business in progress disciplined million in EBITDA comp. $X.X international expansion on is an

resources in We dedicate segments revenue continue significant to diversification. international to both

Trade industry, average addressed lower of first the very risk such contribution in for both FlexSteel industry challenges remain we policy pleased activity with and our record U.S. from full year-over-year. the but Cactus I customer before. and XXXX present outperformed conclusion, In revenue oil to gas segments still the as business performance. uncertainty a with have year levels consolidations both successfully segments year was

In segments, managing manufacturing our internationally value-enhancing responses continuing profile. to we up XXXX, customers our have focused new supported expanding introducing both win historically cost in facility, our production ramping to new on remain matters. products Vietnam such Importantly, and our customers

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

Operator

first the Our from line comes Stifel. Gengaro question Instructions] Stephen [Operator of of

Stephen Gengaro

few with underlying quarters the activity outlook over are the do that, in So guess, I in you of think market? the you activity start outgrow about part activity? And we the next about think U.S., I'd the maybe guess thinking guys U.S. you as can I when things. how X

Scott Bender

and would that continuing let last answer -- that customers, new your comfortable right, first, yes. We're continue so. feel I we'll me is do to and answer I add question all to

constructive. clearly of I And I'm don't rig policy. with that think -- of predates you'd think trade trade agree, it's what's sure course going not is count sort U.S. estimate my this this, -- I the right now policy of

gas count natural range. anticipating rig were XX activity I to to upside probably -- uncertainty based was I was that's ever-changing that Bakken we've from to which areas, believe And was regions, overall and trade about some well, now or We X renewed concerned U.S. we're in probably, onshore the policies. the begun XX the the not, in all continent in upon the there in see. it then, encouraged wasn't these X going follow it

short confident is, the guess whatever we will activity that levels, U.S. I the is, So happens it outperform I'm whatever yes, those. that to answer

Stephen Gengaro

China, point kind the to like then might you the just the in was it a on switched legacy I'm good the harder other think created that of to sort to versus Cactus Bossier crystallize. margins that's a I when about I Bossier you've XXX years No, couple Great. that know trying But that, color. to want on in And versus when sort ballpark? high at had you a to headwind past. back. question, China. the -- level, be basis guess I comments Is City this margin XXX say And some the it of facility over remember business of of

Scott Bender

at in that our of time. supply higher the Steve least East on just cost, in Bossier can was I was chain. a CFO terms basis Far XX% at tell comparative you

as tariffs the prices steel also U.S. it as well. wherever, that Europe, for Bossier So that China steel, going are keep be Vietnam means costs or in to increase. that imported increase increase mind or to And going are

the I steel sort to that extent, But steel pushed on being know. are can But close steel let's of imported anticipate have why is U.S. of internationally. what it, so aluminum. going that's average the and to face pretty you To don't whatever prices be weighted they're hard producers

Stephen Gengaro

Makes sense. And just...

Scott Bender

XX%. about Think

Stephen Gengaro

the the Okay. end that what it, And you tariff and follow-up just versus how situation that, in cost can it a you price? turn then let's market recovery quick back. given to is, I'll public offset seeing and think, you're Do with, call given that

Scott Bender

would didn't us tell. time in very But support I But disappointed if this. our customers will be [indiscernible].

Unknown Executive

just to something. I add need

always have loyal And We're the never I've supported to of we've transparent we do it. very the advantage very loyal and they've why customers because Our been us them. to in in been We've way, us do been we by gratified very what past. them. taken

Operator

comes question JPMorgan Securities. Jayaram of the of next Arun Our from line

Arun Jayaram

forward? flexibility to talk will basis, go-forward be kind I maybe do plan Jay mentioned on the about you and mitigate tariff impact fact you a the discussion. between from that just Bossier maybe a million mitigate in XQ did going have of maybe the supply follow-up that what chain that move do the as a City the to investment have on given tariffs. could But you're $X you now Vietnam to impact

Scott Bender

probably beyond to would answer to just question. have go simply responding My your

I not enough is the capabilities have of it to but given remains that military people. gone won't whole supply think just capacity has not a there largest -- applications. the it spare There Cactus, pivoted forging industry, chain from has surprise are -- we that capacity not lot to domestic domestic There much not you this that and in the hear, country, of here. towards, is

a into Mid lot going that you're like be obvious the larger perhaps see oilfield of Ukraine places see whole not So go service to or service for or are oilfield things if destined were material forgers, that, of you're some going that for the you could East, reasons. to historically to

limit Bossier [indiscernible] than ramp up although are XXXX. to enough, there much were a And just Bossier. today ask we didn't how we So question, is more can interestingly in you we in the

so is demand. that to What would responsibility supplying facility this see to facility expect U.S., So international we're we we vertical our manufacturing -- in needs take pivot see over in, Chinese over Vietnam Vietnam. and our would me now let is expect over take to to the a putting will for begin

of our I So did was the I mention I when Vietnam a demand. may didn't that -- designed capable think handling Vietnam, facility design we have in before the mentioned of that U.S. first we facility entirety

Arun Jayaram

Interesting. maybe... Interesting. And then

Scott Bender

Did that answer you question?

Arun Jayaram

you million Actually that maybe. That I no, that? chain investment, $X just was investment highlight Yes, million clear. supply -- $X -- it could was

Scott Bender

Yes.

slated vertical $X in it's all, million investments So additional $X we it 'XX, first so initial of already now. capabilities. for made postponed will -- this XXXX. us XXXX, But got was million with This the manufacturing to and made right provide

Suzhou, So of supply. more that in the a think we going way we're develop Suzhou be about with fact our the vertical far investment, capital plus modest to amount

Arun Jayaram

Understood.

Scott Bender

confuse you I Did again?

Arun Jayaram

just No, no, maybe get want no. details. my And helpful. follow-up, That's I to more

maybe could from HXS FlexSteel, the wondering about commercialized? now solutions. product to some talked that was And product? address growth And if You maybe you ability I opportunities discuss that the is comment, of maybe

Scott Bender

the first into -- We're are when shipping shipment? going our well, Steve, but to go it let Steve I'll make details, commercialized. Yes. is

Stephen Tadlock

shipment interested. to customer. have or other the least us our sour. And most and and first production, our addressable be U.S. I diameters, Middle bigger at oil where for mean, some we a is April, Really, be is East, for the March market U.S. will customers Yes, pressures in that will

and area applications, some have HXS So water oil been not production. and the other sales in our injection East prior more Middle corrosive

about excited that. So we're

mentioned eventual things. on contribution for we're we of in it FlexSteel supports grand As think scheme from the shooting the the international that XX% we call,

Operator

from comes Gruber [Operator Citigroup. Scott of Instructions] Our next line the of question

Scott Gruber

[indiscernible]

Scott Bender

bit? Scott, can little you speak up a

Scott Gruber

you me? Can hear

Scott Bender

Alan hear turned just That's up. I because volume the Yes, Thanks. now. better you

Scott Gruber

Great. Great.

color a Spoolable bit the in of evolving on product can and how gathering on bought When of you Spoolables, staying to U.S.? the shares about a couple just lines upside talked lines. business had you the and years you provide share So ago,

Spoolables' we So to growth of evolving. growth the I then think how on if how international this And in activity kind touch as see potential should wanted completion the that's U.S.? year, 'XX in is about And well. flattish

Stephen Tadlock

standpoint, a we a we Cactus look least and when we didn't In Well, back there, -- Yes. record February in revenues. at have were prior XXXX, think, total I were about up reported revenue. as whole from the up owners, we X%, XXXX but a was at January

to growth and that of about call last some the we on And we about was -- international that due we're talking talked just now.

But that's was what pleased with rig growing that we're U.S. XX%? despite the count share pretty that. reduction, indicates in -- -- That we were the

Scott Bender

XX%.

Stephen Tadlock

year-over-year. so or XX%

feel our about we good positioning. So very

We expand, on continue to larger diameters. particularly the

less diameters have running more. I probably think laterals, start people into and pressures to it deeper tend and some pushes higher competition of we where to deal the

you're Spoolable as developments of there us benefits it some as if with alternatives, that the So well we see. for looking a field bigger

So a we had very overall, like we're with -- We it. rec we fourth said, quarter. pleased

different. we October off obviously, had off our we're a wish been anticipated. think, further projecting I extremely and We fell than guide bit activity little we of were an strong just

construction weakest seeing guess as we'd a January gets like QX February, we're ramp to to off our start, from is I steel but typically expect. quarter slow up the

don't of have least true XXXX telegraphing at up. the any activity they've be concerns. that it couple many been cases, should we telling that, activity, Customers So are in months, over last us

minimum, the us. Recently, to they're far $X typically lumpier awards, harder million. the and as million, $X be, tend as just to million side to project. more higher international at $X on And They in a for

this order. we almost We benefited international from So have last $X don't an year, that year. QX, in XXXX, million in

we So that kind are. of puts where us

But feeling have our contend the market. about prospects. bullish very overall, to But with I'm we

target as portfolio we to just we areas talked market the about gives our what we're take So growth. then and of but other us, trying expand

Scott Gruber

qualified product in long the for process it has And take product would that for get Middle that a to HDS sale the East? And like interesting. How is begun?

Stephen Tadlock

Yes.

qualified certain API is it currently. ranges pressuring working So further qualification. We're to diameter for on

East through far But now. you and As not... Middle working always it's qualifications, those as some country-specific we're qualifications, have

Scott Bender

Or the in middle of.

Stephen Tadlock

Yes, we're working not a It's this process. in of middle year. be This -- towards the it. multiyear should

Operator

have Stephen And question of a from follow-up Stifel. we Gengaro

Stephen Gengaro

imagine Pressure the think opportunities? on Control the and stand about progress? about kind and probably just as when you in side, also Yes, we as right we and -- you far should in how I East, growth now the where Middle stand think international Argentina the where that of in

Scott Bender

now, me and right have progress real me at ask real in narrative looking the progress. is said we we counsel general shooting question. made that Don't darts. I Our made that

need So at I that. really to it leave

Stephen Gengaro

Okay.

Scott Bender

I on we're think and that to start call knows this never to not anybody, everybody going we've lied now.

Stephen Gengaro

Got you. but -- you That you more sense. But a makes if that business curious it as I I right U.S. we still appreciate now. was I'm until give could just modeling color. can

Scott Bender

Okay. Thank you.

Operator

are remarks. now this like questions there back Chairman I CEO, the no to closing time. And turn Bender, Scott would further conference to and for at

Scott Bender

Okay. working -- the everybody really a want support. that really, This is just to this for that, whole. And company year. our worked us. ensure in your as I transformative for that even be thank my hope XXXX team this to for harder a year. year This hard will doing Thanks everything joining We're happens. power we're

a So joining everybody, us. Thanks for good day. have

Operator

call. presenters. the and Thank gentlemen. thank may Thank disconnect. This you, and day. for you, you conference now good you participating, a And Have ladies concludes

Cactus (WHD) 27 Feb 252024 Q4 Earnings call transcript