Cactus(US:WHD)2025-07-31 15:02Financial Data and Key Metrics Changes - Total Q2 revenue was $274 million, representing a sequential decline of 2.4% [8] - Adjusted EBITDA for Q2 was $87 million, down 7.6% sequentially, with adjusted EBITDA margins at 31.7% compared to 33.5% in Q1 [11][12] - GAAP income decreased to $49 million in Q2 from $54 million in Q1, primarily due to lower operating income [12] - Adjusted net income for Q2 was $53 million, or $0.66 per share, down from $59 million and $0.73 per share in Q1 [12] Business Line Data and Key Metrics Changes - Pressure Control segment revenues were $180 million, down 5.5% sequentially, mainly due to lower rental business revenue [8][9] - Spoolable Technologies segment revenues increased to $96 million, up 3.9% sequentially, driven by higher domestic customer activity [10] - Operating income for the Pressure Control segment declined by $12 million or 22.1% sequentially, while operating income for Spoolable Technologies increased by $4.2 million or 17.5% [9][10] Market Data and Key Metrics Changes - The U.S. Land rig count was reported at 526, which is 5% below the second quarter average [20] - The average rig count is expected to decline further, impacting pressure control revenue in Q3 [20] Company Strategy and Development Direction - The company announced a transformative acquisition of a controlling interest in Baker Hughes' surface pressure control business, aiming to diversify its footprint [6][23] - The focus remains on enhancing operational efficiencies and supply chain management, particularly in light of tariff impacts [17][46] Management's Comments on Operating Environment and Future Outlook - Management noted that the second quarter faced challenges due to tariff increases and commodity market weakness, but free cash flow remained strong [6][24] - The company anticipates that the sharpest domestic activity declines for 2025 are behind them, with expectations for a broader geographic footprint post-acquisition [24] Other Important Information - The Board approved an 8% increase in the quarterly dividend to $0.14 per share, reflecting confidence in cash flow durability [7][15] - Legal expenses related to ongoing litigation increased by approximately $2 million from the first quarter [9] Q&A Session Summary Question: Impact of tariffs on pressure control margins - Management acknowledged that the unexpected doubling of tariffs impacted margins, but cost recovery initiatives were paused due to falling oil prices [27][28] Question: Customer confidence in ramping activity - Management indicated that customers are focused on capital discipline and returning cash to shareholders, which has led to a cautious approach towards CapEx expansion despite favorable oil prices [31][32] Question: Trends in drilling, completions, and production - Management noted that completions activity is expected to decline more significantly than drilling, with production activity not suffering to the same degree [39][40] Question: Acquisition strategy in the Middle East - Management expressed optimism about turning around the acquired business, focusing on supply chain improvements and cultural changes [42][46] Question: Legal charges and ongoing litigation - Management confirmed that trial delays would lead to further legal expenses, but the nature of the dispute involves IP issues related to the SafeLink product [52][53]