Cactus, Inc. ((WHD)) has held its Q1 earnings call. Read on for the main highlights of the call.
Cactus, Inc. recently held its earnings call, revealing a generally positive sentiment despite some challenges. The company showcased strong performance with record bookings and revenue growth, a robust cash position, and successful international expansion. However, challenges such as margin declines in the Pressure Control segment, reduced revenue in Spoolable Technologies, and increased costs due to tariffs were also highlighted. Despite these hurdles, Cactus is actively working on strategies to mitigate these impacts and continues to identify growth opportunities.
Record First Quarter Bookings
Cactus reported record levels of pressure control product revenues per rig and achieved record first quarter bookings in the Spoolable Technologies segment. This indicates strong demand and performance, underscoring the company’s ability to capture market opportunities effectively.
Revenue and EBITDA Growth
The company reported total Q1 revenues of $280 million, marking a 3% sequential increase. Adjusted EBITDA was $94 million, up 1.2% sequentially, demonstrating continued financial growth and resilience in the face of market challenges.
Strong Cash Position and Dividends
Cactus increased its cash balance to $348 million and paid a quarterly dividend of $0.13 per share. This reflects the company’s strong financial position and commitment to shareholder returns, providing confidence in its financial stability.
Successful International Expansion
Sales to international locations surged by 30% quarter-over-quarter, driven by strong demand in Canada and the shipment of the first commercial order of sour service pipe for high H2S applications. This expansion highlights Cactus’s ability to grow its market presence beyond domestic borders.
Pressure Control Segment Margin Decline
Despite revenue growth, the Pressure Control segment experienced a margin decline due to reserves taken in connection with litigation claims. This poses a challenge for the company, impacting its profitability in this segment.
Spoolable Technologies Revenue Drop
Revenues in the Spoolable Technologies segment decreased by 3.6% sequentially, attributed to lower domestic customer activity during the seasonally slow quarter. This highlights a need for strategic adjustments to counteract seasonal fluctuations.
Impact of Tariffs on Costs
Cactus is facing increased tariffs on imports, particularly from China, leading to higher costs. The company is implementing mitigation strategies to address these challenges, including increasing production in its Vietnam facility.
Decline in Net Income
GAAP net income decreased to $54 million from $57 million in the previous quarter, largely due to professional fees incurred at the corporate level. This decline underscores the impact of operational expenses on the company’s bottom line.
Forward-Looking Guidance
For the second quarter, Cactus anticipates a slight decline in pressure control revenue but expects mid to high single-digit revenue growth in the Spoolable Technologies segment. Adjusted EBITDA margins for the pressure control segment are projected to remain stable, while margins for Spoolable Technologies are expected to improve. The company aims to neutralize increased tariff expenses by mid-next year through strategic initiatives, including ramping up production in Vietnam. The Board has also approved a quarterly dividend of $0.13 per share, to be paid in June.
In summary, Cactus, Inc.’s earnings call reflected a positive outlook with record bookings and revenue growth, despite facing some challenges. The company is taking proactive steps to mitigate tariff impacts and continues to explore growth opportunities, particularly in international markets. Investors can remain optimistic about Cactus’s future performance, given its strong financial position and strategic initiatives.