Cactus(US:WHD)2024-02-29 18:32Financial Data and Key Metrics Changes - For Q4 2023, total revenue was $275 million, with adjusted EBITDA of $100 million and an adjusted EBITDA margin of 36.4% [8][14] - Full year 2023 saw record revenues and adjusted EBITDA for both business segments despite a decline in US land activity [7] - GAAP net income for Q4 was $62 million, down from $68 million in Q3, while adjusted net income was $65 million, up from $64 million [17][18] - The company ended Q4 with a cash balance of $134 million, an increase of over $70 million sequentially [19] Business Line Data and Key Metrics Changes - Pressure Control segment revenues were $180 million, down 1.1% sequentially, but operating income increased by 2.2% [11] - Spoolable Technologies segment revenues were $94 million, down 10.4% sequentially, with operating income decreasing significantly due to remeasurement expenses [12] - Adjusted EBITDA for the Pressure Control segment increased by 2.3% sequentially, while Spoolable Technologies saw a decrease of 10.2% [11][12] Market Data and Key Metrics Changes - The US land rig count is expected to remain flat in the first quarter of 2024, with caution due to recent weakness in natural gas prices [23][30] - Increased inquiries for frac rental equipment suggest potential growth in Q2 2024 [23] Company Strategy and Development Direction - The company is focused on enhancing its low-cost manufacturing capabilities and diversifying its supply chain to reduce costs [42] - Expansion plans in the Middle East are underway, with expectations for customer acceptance and first orders by late 2024 [27] - The company aims to generate substantial free cash flow in 2024 to increase shareholder returns or pursue growth opportunities [32] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the overall rig count due to expected consolidations and low natural gas prices [41] - The company remains optimistic about market share growth despite a challenging environment [49] - New product rollouts, including a modified frac valve and a new wellhead design, are anticipated to positively impact margins later in 2024 [38][40] Other Important Information - Corporate and other expenses were $5.7 million in Q4, down from the previous quarter [13] - Net capital expenditures for 2023 were approximately $38.6 million, with expectations of $45 million to $55 million for 2024 [20] Q&A Session Summary Question: Increase in activity from majors - Management noted increased activity from majors and international orders, particularly from Latin America and the Middle East [33] Question: Details on new product introduction - The new frac valve is being rolled out, significantly reducing repair costs, while the new wellhead design is expected in Q3 to Q4 [36][38] Question: CapEx perspective regarding Saudi Aramco - Management remains cautious but sees potential business opportunities in Saudi Arabia despite recent news [39] Question: Revenue growth expectations - Management is optimistic about market share growth but cautious about overall rig count due to consolidations [48][49] Question: International market penetration - Currently, 5% to 10% of revenue comes from outside North America, with expectations for significant growth in the future [44][45]