Cactus Inc (WHD) Q2 2024 Earnings Call Highlights: Strong Revenue Growth and Dividend Increase

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Wed, Oct 9, 2024, 1:47 PM 4 min read

Revenue: $290 million for Q2 2024.
Adjusted EBITDA: $104 million with a margin of 35.7%.
Cash Balance: Increased to $247 million.
Quarterly Dividend: Increased by 8% to $0.13 per share.
Pressure Control Segment Revenue: $187 million, up 6.9% sequentially.
Pressure Control Segment Operating Income: Increased by $4 million or 7.7% sequentially.
Spoolable Technologies Segment Revenue: Up 4.7% sequentially.
Spoolable Technologies Segment Operating Income: Increased by $13.6 million sequentially.
GAAP Net Income: $63 million for the quarter.
Adjusted Net Income: $65 million, with earnings per share of $0.81.
Depreciation and Amortization Expense: $15 million for the second quarter.
Net CapEx: Approximately $7 million during the second quarter.

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Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cactus Inc (NYSE:WHD) reported a solid quarter with total Q2 revenues of $290 million and adjusted EBITDA of $104 million, reflecting strong operational performance.
The company increased its cash balance to $247 million, demonstrating effective cash management and financial stability.
Cactus Inc (NYSE:WHD) announced an 8% increase in the quarterly dividend to $0.13 per share, indicating confidence in future cash flows and commitment to returning value to shareholders.
The Pressure Control segment saw a 6.9% sequential revenue increase, driven by new customer acquisitions and improved customer efficiency.
The company is optimistic about international expansion, particularly in the spoolable technologies segment, with increased quoting activity and strategic resource allocation.

Negative Points

Cactus Inc (NYSE:WHD) anticipates a moderation in Pressure Control revenue in the third quarter due to lower average US land drilling activity and less visibility into production equipment shipments.
The company faces potential challenges from increased ocean freight costs, which could impact adjusted EBITDA margins.
International expansion efforts are progressing slower than anticipated, particularly in pressure control product qualifications.
The company is cautious about the impact of natural gas prices and consolidation in the US land drilling market, which could affect future rig counts.
There is a significant disparity between the market share for production valves and wellheads, indicating room for improvement in the production segment.

Q & A Highlights

Q: Can you expand on the international momentum in spoolable technologies and the traction with larger diameter products? A: Stephen Tadlock, Executive Vice President, explained that Cactus is focusing on international growth by adding key personnel and increasing quoting activity. The company is seeing more interest in larger diameter products due to their rapid installation and corrosion resistance, which is appealing to both midstream and E&P operators.

Q: What is your outlook for the US land rig count for the rest of the year and into 2025? A: Scott Bender, CEO, stated that he believes the worst of the rig count decline is behind them, with the count stabilizing around 550. He is optimistic about natural gas prices improving in 2025, although consolidation could impact rig counts. He emphasized that wellhead shipments per rig have increased, indicating efficiency gains.

Q: How are you driving international growth for the spoolable business, and what is your target for international revenue? A: Stephen Tadlock noted that while they are not bundling products, they are leveraging shared resources and channel partners to grow internationally. Scott Bender added that the objective is for international revenue to reach 40% of total revenue in the next few years, with significant potential for growth in spoolable technologies.

Q: How would increased tariffs on Chinese goods affect your business? A: Scott Bender explained that while increased tariffs could raise costs, Cactus is better positioned than competitors due to its US manufacturing capabilities. The company has built a plant capable of handling international business, mitigating the impact of potential tariffs.

Q: Can you provide more details on the significant order from a large customer that contributed to the Q2 beat? A: Scott Bender mentioned that the order came from a customer who was already using Cactus for wellheads but not for production trees. He noted that customers are becoming more discriminating in their production equipment choices, and Cactus's control over valve quality and delivery is appealing to them.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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