Revenue: $280 million, up 3% sequentially. Adjusted EBITDA: $94 million, up 1.2% sequentially. Adjusted EBITDA Margin: 33.5%. Pressure Control Segment Revenue: $190 million, up 7.7% sequentially. Spoolable Technologies Segment Revenue: $93 million, down 3.6% sequentially. Corporate and Other Expenses: $9.6 million, up $3.7 million sequentially. GAAP Net Income: $54 million. Adjusted Net Income: $59 million. Adjusted Earnings Per Share (EPS): $0.73 per share. Cash Balance: $348 million, a sequential increase of approximately $5 million. Quarterly Dividend: $0.13 per share. Depreciation and Amortization Expense: $16 million. Net CapEx: Approximately $9 million during the first quarter.

Warning! GuruFocus has detected 2 Warning Sign with WHD.

Release Date: May 01, 2025

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

Positive Points

Cactus Inc (NYSE:WHD) reported record levels of Pressure Control product revenues per rig and record first quarter bookings in their Spoolable Technologies business. The company achieved a total revenue of $280 million and an adjusted EBITDA of $94 million, with an adjusted EBITDA margin of 33.5%. Cactus Inc (NYSE:WHD) increased its cash balance to $348 million and paid a quarterly dividend of $0.13 per share. The company is actively mitigating tariff impacts by increasing alternative sourcing and ramping up production from its Vietnam facility. Cactus Inc (NYSE:WHD) has a high-quality customer base in its Spoolable Technologies segment, with approximately 70% of revenue coming from majors, large E&Ps, and NOCs, which are more resilient in a lower commodity price environment.

Negative Points

The Pressure Control segment experienced a decline in operating margins due to reserves taken in connection with litigation claims. Revenues for the Spoolable Technologies segment were down 3.6% sequentially due to expected lower domestic customer activity in the seasonally slow quarter. Corporate and other expenses increased by $3.7 million sequentially, primarily due to professional fees associated with growth initiatives. The company faces challenges from increased tariffs on imports from China and Vietnam, which may lead to modest margin compression until mid-next year. Cactus Inc (NYSE:WHD) anticipates a decline in Pressure Control revenue in the second quarter due to moderating levels of products sold per rig and a decline in average activity levels.

Q & A Highlights

Q: Can you discuss the transition from China to Vietnam for manufacturing and how it impacts costs? A: Scott Bender, CEO, explained that the shift to Vietnam is aimed at neutralizing tariff impacts by mid-next year. While Bossier City is not a low-cost operation, it ensures fast turnaround and market share protection. The transition to Vietnam will allow for a more integrated supply chain, reducing reliance on Chinese imports.

Story Continues

Q: Are customers trying to pull forward purchases due to tariffs, and can they absorb increased costs? A: Scott Bender confirmed that customers have attempted to pull forward purchases, but Cactus has denied these requests to maintain fairness. He is confident that customers will bridge the gap during the interim period, maintaining absolute profitability despite margin percentage declines.

Q: How do you expect customer behavior to change during this downturn? A: Scott Bender noted that major customers are sticking with Cactus due to their transparency and ability to guarantee delivery. While competitors may try to take advantage of tariff impacts, Cactus's sustainable supply chain offers a significant advantage.

Q: What are the prospects for M&A opportunities given the current macro environment? A: Scott Bender indicated that private equity-owned oilfield service investments are available at attractive prices. While the focus remains on the current industry, Cactus is open to opportunities similar to the FlexSteel acquisition.

Q: How will the Vietnam manufacturing mix evolve, and what is the impact of tariffs on margins? A: Scott Bender stated that Vietnam will eventually replace China for U.S. market supply, with the Chinese operation focusing on international markets. Jay Nutt, CFO, mentioned that while there will be some margin compression due to tariffs, diversification and sourcing initiatives will help mitigate impacts.

Q: What is the potential impact of the ongoing Section 232 investigation on steel tariffs? A: Scott Bender expressed that the U.S. lacks adequate steelmaking capacity, making additional tariffs inflationary. He noted that the existing tariffs already contribute to inflation, and further tariffs would exacerbate this issue.

Q: Can you elaborate on the market potential for sour service FlexSteel pipe? A: Stephen Tadlock, EVP, mentioned that while the North American market for sour service pipe is growing, the Middle East presents significant opportunities due to high H2S content in production. FlexSteel's reliability and robustness make it a premium choice in these markets.

Q: How does Cactus plan to maintain profitability amid tariff challenges? A: Scott Bender emphasized that Cactus's diverse supply chain and manufacturing cost profile, along with customer support, will help maintain profitability. The company is confident in its ability to navigate the current environment and emerge stronger.

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

This article first appeared on GuruFocus.