Cactus, Inc. Q3 FY2025 earnings call

Key Points

• Third quarter performance: Pressure Control margins improved via tariff mitigation and cost reduction; Spoolable Technologies sales/margins exceeded expectations on higher international shipments. Total revenue $264M, adjusted EBITDA $87M, margin 32.9%. Paid dividend $0.14/share, cash balance $446M.
• Tariff situation: No substantial tariff rate changes, seeking clarity on recent reductions; Section 232 tariff at 50% is impactful; Vietnam plant ramping up shipments.
• Acquisition update: Planned acquisition of majority interest in Surface Pressure Control business of Baker Hughes proceeding smoothly, expected to close early 2026.

Total Q3 revenues were $264 million. For the Pressure Control segment, revenues were $169 million, down 6.2% sequentially. Operating income increased $2.2 million, operating margins up 290 basis points, adjusted segment EBITDA $2.1 million higher, margins up 320 basis points. For the Spoolable Technologies segment, revenues were $95 million, down 1% sequentially. Operating income decreased $2.2 million, operating margins down 210 basis points, adjusted segment EBITDA down $2 million, margins down 160 basis points. Corporate and other expenses declined $0.5 million to $9.1 million in Q3, with adjusted corporate EBITDA down slightly. Pressure Control contributed ~64% of total revenue, Spoolable Technologies ~36%.

Fourth Quarter Outlook

• Pressure Control: Revenue flat vs Q3, adjusted EBITDA margins 31%-33% (excludes ~$3M stock-based comp).
• Spoolable Technologies: Revenue down low double digits sequentially, adjusted EBITDA margins 34%-36% (excludes ~$1M stock-based comp).
• Corporate EBITDA: Charge of ~$4M (excludes $2M stock-based comp).
• Acquisition: Expected to close early 2026.

Risks

• Tariff uncertainty: Ongoing uncertainty in tariff rates, particularly Section 232 tariff at 50% impacting operations.
• Market volatility: Concerns about oil price fluctuations and their impact on customer spending/activity levels.
• Integration risks: Potential challenges in integrating the acquired Surface Pressure Control business.

Q: Broad question on U.S. customers' thoughts and oil price concerns A: Customers concerned about oil price downside, less transparent in budgeting, larger customers with core inventories less affected.

Q: Expansion on Spoolable international opportunities A: Worldwide interest, expanded personnel, new markets like Australia, Southeast Asia, Middle East; sour service product opening markets.

Q: Pressure Control margin beat explanation A: Combination of supplier cooperation, customer support, and flexibility in variable cost business.

Q: Update on Cactus SPC transaction and Vietnam sourcing A: Integration planning proceeding, Vietnam ramp progressing, API certification expected in next 90 days.

Q: Time frame for unconventional drilling pickup globally A: Anticipate meaningful shipments by 4Q 2026, significant contributor in 2027.