Cactus(US:WHD)2019-05-04 03:25Financial Data and Key Metrics Changes - Q1 revenues reached $159 million, a 38% increase compared to the same period last year and a 14% increase sequentially [10] - Adjusted EBITDA for Q1 was $59 million, up 38% year-over-year and 10% sequentially, representing 37% of revenues [16] - Net income increased to $48 million from $39 million in Q4 2018, including an income tax benefit of $8 million [15] - Cash position increased by $17 million to $88 million at the end of Q1, with operating cash flow of $34 million [19] Business Line Data and Key Metrics Changes - Product revenues were $87 million, a 47% increase year-over-year and 10% sequentially, with a gross margin of 39% [11] - Rental revenues reached $39 million, a 32% increase compared to Q1 2018 and 23% higher sequentially [12] - Field service and other revenues were $34 million, up 25% year-over-year and 14% sequentially, driven by increased billable hours [13] Market Data and Key Metrics Changes - Average U.S. market share in the products business increased from 27.8% to a record 29.1% [8] - The U.S. land rig count declined by 3% sequentially, contrasting with the company's growth trajectory [7] Company Strategy and Development Direction - The company is focused on maintaining capital discipline and generating free cash flow while exploring growth opportunities in completions and rental services [32] - There is a cautious optimism regarding modest increases in drilling activity in the latter part of the year, driven by stabilized crude prices above $60 per barrel [24] - The company plans to invest in new innovations and expand market penetration, particularly with private operators [27][26] Management's Comments on Operating Environment and Future Outlook - Management noted that while the rig count is expected to decline, product revenues may remain stable based on preliminary results [23] - There is an expectation of no meaningful changes in overall margins, with slight declines in product margins offset by gains in rental [31] - The impact of Section 301 tariffs was significant in Q1, but management anticipates minimal further effects post-Q2 [30] Other Important Information - SG&A expenses increased to $12.7 million, primarily due to higher stock-based compensation and professional fees [14] - The company expects capital expenditures for 2019 to remain in the low $60 million range, focusing on growth capital for the rental business [21] Q&A Session Summary Question: Capital discipline and customer value proposition - Management confirmed that the focus is on efficiency gains rather than cost reductions per well [35] Question: Visibility into customer planning and rig count - Management indicated it is early to gauge customer plans but noted increased inquiries from private operators [38] Question: Medium- to long-term business perspective - Management expressed confidence in growth opportunities in the completions side of the business due to low market share [43] Question: Competitive response from major oil companies - Management acknowledged that competitors are improving their products in response to the company's market share gains [86] Question: Timing for new frac innovation products - Management stated that new products are in the field but will not significantly impact until Q3 [95] Question: Impact of manufacturing capacity on rental margins - Management indicated that better utilization of assets will positively impact rental margins [104] Question: Potential for capital return - Management suggested that if no suitable opportunities arise, an announcement regarding capital return could be made by year-end [67]