01-08-2025
Cactus Inc (WHD) Q2 2025 Earnings Call Highlights: Navigating Challenges with Strategic Moves
Revenue: $274 million, a sequential decline of 2.4%.
Adjusted EBITDA: $87 million, down 7.6% sequentially.
Adjusted EBITDA Margin: 31.7%, compared to 33.5% in the previous quarter.
Cash Balance: Increased to $405 million, a sequential increase of approximately $58 million.
Quarterly Dividend: Increased by 8% to $0.14 per share.
Pressure Control Segment Revenue: $180 million, down 5.5% sequentially.
Spoolable Technology Segment Revenue: $96 million, up 3.9% sequentially.
Operating Income: Declined by $12 million or 22.1% sequentially.
Net Income: GAAP income of $49 million, down from $54 million in the previous quarter.
Adjusted Net Income: $53 million, or $0.66 per share.
Legal Expenses: $5.1 million, an increase of approximately $2 million from the first quarter.
Net CapEx: Approximately $11.1 million during the second quarter.
Warning! GuruFocus has detected 2 Warning Sign with WHD.
Release Date: July 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cactus Inc (NYSE:WHD) generated substantial free cash flow during the second quarter despite challenges from tariffs and commodity market weakness.
The company announced a transformative acquisition of a controlling interest in Baker Hughes's surface pressure control business, which is expected to diversify its footprint.
Spoolable technologies business outperformed profit expectations, with revenues up 3.9% sequentially due to higher domestic customer activity.
Cactus Inc (NYSE:WHD) increased its cash balance to $405 million and announced an 8% increase in its quarterly dividend to $0.14 per share.
The company is optimistic about the durability of its cash flows and has a structurally capital-light business model, allowing for consistent dividend increases.
Negative Points
Total Q2 revenues declined by 2.4% sequentially, with adjusted EBITDA down 7.6% due to lower operating income and margins.
Pressure control segment revenues decreased by 5.5% sequentially, primarily due to lower rental business revenue and a less favorable product mix.
Operating margins compressed by 510 basis points, impacted by lower operating leverage and higher product costs due to tariffs.
The company recorded $5.1 million in legal expenses and reserves related to litigation claims, an increase from the previous quarter.
Unexpected doubling of Section 232 tariffs on steel and derivatives significantly impacted costs, leading to depressed margins as the quarter ended.
Q & A Highlights
Q: Can you provide more color on how pressure control margins remained flat despite the impact of tariffs in June? A: Scott Bender, CEO: The unexpected doubling of Section 232 tariffs significantly impacted our costs, as did our shift to higher-cost US supply chains. Additionally, our cost recovery initiatives were paused due to declining oil prices, which led customers to request price relief instead.
Q: With oil prices relatively high, what are your customers looking for to ramp up activity? A: Scott Bender, CEO: Despite reasonable returns at current oil prices, customers are focused on capital discipline and returning cash to shareholders. Gas market activity is expanding, but it starts from a lower base compared to oil.
Q: How do you view the trends in drilling, completions, and production for the second half of the year? A: Scott Bender, CEO: Completion activity is expected to decline more significantly than drilling. Frac-related activity is already down 12% from Q2 levels, and production activity will also soften, though not as much as completions.
Q: How do you plan to approach the Middle East acquisition, given its previous management under Baker Hughes? A: Scott Bender, CEO: We plan to implement a flatter organizational structure and focus on supply chain improvements. Our approach will emphasize cultural changes and a focused strategy similar to what we applied in the US market.
Q: What factors could drive improvement in pressure control margins in 2026, even in a soft drilling market? A: Scott Bender, CEO: Improvements will come from cost recovery efforts, migration to Vietnam for supply chain benefits, and right-sizing initiatives. Vietnam's lower tariff rates compared to China will also be advantageous.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
