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Cactus Inc (WHD) Q1 2024 Earnings Call Transcript Highlights: Navigating Market Challenges with ...

GuruFocus Research
·3 min read

  • Total Q1 Revenue: $274 million.

  • Adjusted EBITDA: $95 million.

  • Adjusted EBITDA Margin: 34.8%.

  • Quarterly Dividend: $0.12 per share.

  • Cash Balance: Increased to $194 million.

  • Pressure Control Segment Revenue: $175 million, down 3% sequentially.

  • Spoolable Technologies Segment Revenue: $99 million, up 5% sequentially.

  • GAAP Net Income: $50 million.

  • Adjusted Net Income: $60 million.

  • Earnings Per Share (Adjusted): $0.75.

  • Income Tax Expense: Approximately $13 million.

  • Net CapEx: Approximately $7 million.

Release Date: May 02, 2024

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

Positive Points

  • Cactus Inc (NYSE:WHD) reported strong sales in Spoolable Technologies, showing growth from the previous quarter due to robust sales to large integrated customers.

  • The company's total revenue for Q1 was $274 million with an adjusted EBITDA of $95 million and an adjusted EBITDA margin of 34.8%, demonstrating solid financial performance.

  • Cactus Inc (NYSE:WHD) increased its cash balance to $194 million, indicating strong liquidity and financial health.

  • The company paid a quarterly dividend of $0.12 per share, reflecting its ongoing commitment to returning value to shareholders.

  • Cactus Inc (NYSE:WHD) is pursuing expansion plans in the Mideast, targeting a market for surface pressure control equipment that exceeds $0.5 billion annually, which could significantly enhance future revenues.

Negative Points

  • The Pressure Control segment saw a revenue decrease of 3% sequentially, primarily due to decreased customer activity, highlighting potential volatility in market demand.

  • Operating income and adjusted segment EBITDA in the Pressure Control segment both decreased due to lower operating leverage and margin declines.

  • The Spoolable Technologies segment faced increased input costs, which negatively impacted the adjusted EBITDA margin by 240 basis points.

  • Cactus Inc (NYSE:WHD) reported a sequential decrease in GAAP net income from $62 million in the fourth quarter to $50 million in the first quarter, largely due to an increase in the remeasurement of the earn-out liability.

  • Despite the increase in cash balance, the company faces challenges with the macroeconomic backdrop providing little optimism for 2024 U.S. activity levels in the oil and gas sector.

Q & A Highlights

Q: When can we expect international operations to significantly impact Cactus Inc's income statement? A: Scott Bender, CEO, mentioned that international operations are expected to have a meaningful impact next year.

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Q: How does Cactus Inc view the US land market activity for the remainder of the year? A: Scott Bender, CEO, expressed a lack of optimism for significant improvement in 2024. He anticipates a potential plateau as the year progresses, particularly after a trough in onshore rig counts during the summer.

Q: What are the expectations for the Pressure Control segment's revenue and EBITDA margins in Q2 2024? A: Scott Bender, CEO, expects the Pressure Control segment's revenue to be relatively flat compared to Q1, with adjusted EBITDA margins projected to be between 33% and 35%.

Q: What are the projections for the Spoolable Technologies segment in Q2 2024? A: Scott Bender, CEO, anticipates a slight increase in revenue from Q1, with adjusted EBITDA margins expected to be around 36% to 38%.

Q: Can you provide details on the financial performance in Q1 2024? A: Al Keifer, Interim CFO, reported Q1 revenues of $274 million with an adjusted EBITDA of $95 million and a 34.8% EBITDA margin. He noted a decrease in net income primarily due to a remeasurement of the FlexSteel earn-out liability.

Q: What is the outlook for dividends and capital expenditures in 2024? A: Al Keifer, Interim CFO, mentioned that the quarterly dividend will remain at $0.12 per share, with net CapEx for the year expected to be between $45 million and $55 million.

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

This article first appeared on GuruFocus.