Cactus, Inc. Q3 FY2024 earnings call

• Scott Bender reported Q3 results showing total company revenue of $293 million, adjusted EBITDA of $100 million, and adjusted EBITDA margin of 34.2%, with cash balance increased to $303 million. • Jay Nutt provided detailed financial review, including segment performances, GAAP vs non-GAAP measures, cash flow, dividends, and CapEx. • Scott Bender discussed Q4 operational expectations: Pressure Control revenue expected mid-single digit dip; Spoolable Technology revenue down mid to high single digits; adjusted EBITDA margins for Pressure Control 33%-35% and Spoolable Technology 36%-38%; corporate EBITDA charge ~$4 million. • Mentioned international expansion focus, including Mideast business, and new product rollouts like latest generation wellhead system and frac valve design prototype testing.

The company has two business segments. The Pressure Control segment had revenues of $185 million, down 1.1% sequentially. Operating income decreased $3.1 million or 5.6% sequentially, and adjusted segment EBITDA decreased $3.3 million or 5.1% sequentially. The Spoolable Technology segment had record quarterly revenue, up 4.3% sequentially. Operating income increased $2.9 million sequentially, and adjusted segment EBITDA was flat sequentially. Total company revenue was $293 million, with Pressure Control contributing approximately 63.1% of revenue and Spoolable Technology contributing approximately 36.9%.

• Fourth quarter Pressure Control revenue expected mid-single digit dip vs Q3 due to lower U.S. land drilling activity and seasonal factors. • Adjusted EBITDA margins in Pressure Control segment expected 33%-35% for Q4, excluding ~$3 million stock-based comp. • Spoolable Technology Q4 revenue down mid to high single digits, adjusted EBITDA margins ~36%-38%, excluding $1 million stock-based comp. • Corporate adjusted EBITDA expected charge of ~$4 million in Q4, excluding ~$1.7 million stock-based comp. • Full year 2024 CapEx outlook reduced to $32 million to $37 million. • Board approved quarterly dividend of $0.13 per share.

• Geopolitical risks related to tariffs, potential impact on supply chain and competition. • Uncertainty around operator consolidations and its impact on supply chain relationships.

Q: Thoughts on augmenting the portfolio and inorganic growth opportunities, especially international focus.

A: Scott Bender stated primary focus on international, but would consider Flexsteel-like opportunities if present, with strong balance sheet.

Q: Thoughts on tariffs ahead of election, and impact on production.

A: Scott Bender said Cactus is in best position due to U.S. manufacturing, and international expansion helps mitigate tariff risks.

Q: Cash balance and deployment, potential return to shareholders.

A: Scott Bender said too much cash, would return to shareholders if no expansion opportunities, but currently focused on potential acquisitions.

Q: Update on Middle East wellhead system qualification and facility building.

A: Scott Bender said testing ongoing, full speed ahead, responsible rollout.

Q: Market changes from customer perspective, impact on high-performance products.

A: Scott Bender said market shifting to high grading of supply chain by majors, benefiting Cactus.

Q: EBITDA growth outlook with flattish rig counts.

A: Scott Bender said yes, Cactus can deliver modest growth in EBITDA next year.

Q: Revenue per rig movement in Pressure Control, impact of production tree call offs.

A: Scott Bender said production tree call offs are primary driver of revenue per rig changes.

Q: Tariffs impact on revenue per rig in past, and future actions.

A: Scott Bender said tariffs not major factor before, current focus on addressing geopolitical risks in supply chain.

Q: Quantification of International Spoolable Technology revenue and future growth.

A: Stephen Tadlock said international is high single digits of spoolable revenue, viewed as active growth area with resources dedicated.