Cactus(US:WHD)2019-03-07 20:46Financial Data and Key Metrics Changes - In 2018, the company reported revenues of $544 million, an increase of nearly 60% from 2017, and adjusted EBITDA rose almost 90% year-over-year to $213 million [7] - For Q4 2018, revenues were $139.8 million, which was 33.4% higher than the same period last year but 7.2% lower than Q3 2018 [10] - Adjusted EBITDA for Q4 was $53.5 million, representing a 52.7% increase year-over-year but down 12.7% sequentially, with adjusted EBITDA margins at 38.3% compared to 40.7% in Q3 2018 [14][16] - Net income for Q4 was $38.7 million, down from $43.6 million in Q3 2018 [14] Business Line Data and Key Metrics Changes - Product revenues, including consumables used in drilling and production, were $78.9 million, up 38.1% from Q4 2017 but down 0.6% from Q3 2018 [10] - Rental revenues were $31.2 million, an increase of $6.7 million compared to Q4 2017 but a decrease of $6.9 million sequentially due to reduced completion activity [11] - Field service and other revenues were $29.7 million, up $6.6 million year-over-year but down $3.4 million from Q3 2018, attributed to decreased billable hours and typical Q4 seasonality [12] Market Data and Key Metrics Changes - The company's average US market share in its products business increased from 27.4% to 27.8% during the quarter [9] - The company anticipates a sequential increase in rental revenues of approximately 15% in Q1 2019, driven by improved completion activity [23] Company Strategy and Development Direction - The company aims to maintain a focus on free cash flow and returns while being well-positioned to gain market share in 2019 [30] - New completions innovations are expected to generate noticeable revenue in the second half of 2019, with a potential 20% increase in rental revenue run rate by year-end [25] - The company is cautious about overall drilling activity levels despite a modest decline in rig counts, expecting a more muted pullback in spending from E&Ps [21] Management's Comments on Operating Environment and Future Outlook - Management noted that customers were less willing to complete wells due to lower oil prices but expected a normalization of completion activity as budgets reset in the New Year [22] - The company is optimistic about the impact of new rental innovations and the potential for increased market share in the frac rental business [25][86] Other Important Information - The effective tax rate for Q4 was 11.4%, lower than the federal tax rate due to profits from non-controlling interests not being subject to US federal tax [15] - The company’s cash position increased by $28.9 million during Q4, reaching $70.8 million by year-end [17] Q&A Session Summary Question: Can you provide insights on the tariff impact and competitive positioning? - Management expressed a more relaxed stance regarding potential tariff increases, noting that they had accelerated inventory receipts in anticipation of higher tariffs but have not taken similar steps this year [34] - The company believes it is in a good position compared to competitors who rely heavily on China for manufacturing [36] Question: How do you expect margins to unfold in Q1 across each segment? - Margins for rental and product segments are expected to be slightly down, while service margins should see a considerable increase [43] Question: What is the outlook for the frac tree assets and their utilization? - The company reported that gross rental PP&E increased from about $85 million at the end of 2017 to about $124 million at the end of 2018, with plans for further growth [61] Question: How do you see the cadence of completions in 2019? - Management indicated a cautious outlook, expecting a gradual increase in completion activity, particularly in the third and fourth quarters [86]