Cactus(US:WHD)2023-08-08 20:41Financial Data and Key Metrics Changes - Total Q2 revenues were $306 million, with adjusted EBITDA of $115 million and adjusted EBITDA margins of 37.7% [8][14] - GAAP net income was $32 million in Q2, down from $52 million in Q1, primarily due to higher tax and interest expenses [18] - Adjusted net income for Q2 was $67 million, or $0.84 per share, compared to $51 million and $0.64 per share in Q1 [19] - The company paid a quarterly dividend of $0.11 per share, which has been increased by 9% to $0.12 per share [9][20] Business Line Data and Key Metrics Changes - Pressure Control revenues were $199 million, up 2.3% sequentially, with operating income increasing by 10.3% [10] - Adjusted segment EBITDA for Pressure Control was $69.9 million, a slight increase of 1.2% sequentially [11] - Spoolable Technologies revenues were $106.7 million, with an operating loss of $6 million due to various costs associated with the acquisition [12] - Adjusted segment EBITDA for Spoolable Technologies was $45.5 million, with margins of 42.6%, reflecting improved operating leverage [13] Market Data and Key Metrics Changes - The US land rig count is down 17% from year-end 2022 levels and down 14% from Q1 2023 average levels [24] - The company expects Pressure Control revenue to decline approximately 10% in Q3 due to reduced drilling activity [24] - The Spoolable Technologies segment is expected to remain stable, driven by market penetration and share of wallet [28] Company Strategy and Development Direction - The company aims to leverage its differentiated offerings in both Pressure Control and Spoolable Technologies to outperform market declines [25][35] - The integration of FlexSteel is a key focus, with expectations to introduce new products and services in 2024 [33][34] - The company is committed to maintaining a strong balance sheet while pursuing organic and inorganic growth opportunities [34] Management's Comments on Operating Environment and Future Outlook - Management noted a resilient performance despite a weakening US land market, with expectations for stabilization in rig counts by late Q3 [24][39] - The company anticipates that larger, well-capitalized customers will continue to invest through commodity cycles [25] - Management expressed confidence in the ability to maintain margins in the Spoolable Technologies segment despite market fluctuations [49][50] Other Important Information - The company has repaid the full $155 million of debt related to the FlexSteel acquisition, returning to a net cash position [9][20] - Changes in management roles were announced, with Scott Bender assuming the role of Chairman and Joel Bender becoming President [30][31] Q&A Session Summary Question: Market share growth expectations - Management confirmed record market share for the quarter but did not provide specific figures on pricing or market share changes [37][38] Question: Rig count stabilization - Management revised the expected trough of US land rig count down to approximately 600, with indications of stabilization and potential increases in Q4 [39][40] Question: Customer activity and 2024 outlook - Management noted that larger customers have maintained robust activity in certain areas, but there is no current visibility into 2024 budgets [44][45] Question: Spoolable Technologies margins - Management indicated that the impressive margins in Spoolable Technologies are expected to be maintained due to the competitive advantages of the business [48][49] Question: Lag in Spoolable revenue impact - Management acknowledged a historical lag of about three to four months in revenue impact from rig count changes, but noted that increased market penetration may offset this [68]