Cactus(US:WHD)2022-05-07 19:37Financial Data and Key Metrics Changes - Cactus reported Q1 2022 revenues of $146 million, a 12% increase sequentially [10] - Adjusted EBITDA for Q1 2022 was approximately $42 million, up 16% from $37 million in Q4 2021, with adjusted EBITDA margins at 29%, an increase of 80 basis points [8][14] - GAAP net income was $27 million in Q1 2022, compared to $20 million in Q4 2021, driven by higher operating income and lower income tax expense [18] - The company ended the quarter with $298 million in cash and no debt, with operating cash flow of approximately $17 million [8][20] Business Line Data and Key Metrics Changes - Product revenues were $94 million, up 12% sequentially, with product gross margins at 35%, an increase of 60 basis points [10] - Rental revenue was $22 million, up 16% versus Q4 2021, with gross margins increasing by 820 basis points [11] - Field service and other revenues were approximately $30 million, up 10% versus Q4 2021, representing 25% of combined product and rental-related revenues [11] Market Data and Key Metrics Changes - U.S. product market share remained strong at 41%, with rigs followed increasing by over 11% [24] - Despite lower rig efficiencies, product revenue per U.S. land rig followed increased due to cost recovery efforts [24] Company Strategy and Development Direction - Cactus aims to maintain a focus on margin expansion and market share gains, with expectations for product revenue to increase by 10% in Q2 2022 [26] - The company is exploring M&A opportunities to expand geographically and enhance competitive positioning, while also committing to sustaining dividends [33][75] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about ancillary supply issues, including availability of pipe, rigs, and other materials, which could limit growth [38] - The company anticipates continued cost recovery efforts to mitigate inflationary pressures from labor and fuel costs [12][27] - Management remains optimistic about increasing rig counts and market share, particularly with private operators becoming more sophisticated [48][30] Other Important Information - Cactus has elevated inventory levels to address supply chain uncertainties and ensure timely delivery to customers [21][29] - The company announced the retirement of David Isaac, Chief Administrative Officer and General Counsel, and the appointment of Will Marsh as his successor [34] Q&A Session Summary Question: What are the main risks over the next 12 months? - Management highlighted ancillary supply issues as a primary concern, including availability of rigs and materials [38] Question: How does the current cycle compare to previous cycles? - Management indicated potential for meaningful margin expansion, with volume expansion constrained [42] Question: Can you discuss market share dynamics with private operators? - Management noted increased traction with private operators, which could lead to higher market share [46] Question: What are the biggest supply chain bottlenecks? - Management identified vessel loadings and sailings from China as significant challenges, but expects improvements [56] Question: How are competitors handling cost recovery? - Management observed that larger competitors are being more responsible in cost recovery, while smaller players may struggle [60] Question: What is the outlook for rig counts? - Management expects the U.S. rig count to approach 800 by year-end, with potential challenges in efficiency for new rigs [66][70]