Cactus, Inc. Q4 FY2024 earnings call

• 2024 business continued to outperform with revenue and earnings outpacing softening industry activity levels over the past two years.
• Fourth-quarter total company highlights: revenue $272 million, adjusted EBITDA $93 million, adjusted EBITDA margins 34.1%. Paid quarterly dividend of $0.13 per share and increased cash balance to $343 million.
• Flexsteel acquisition impact: included $4 million of amortization expense related to tangible intangible assets in Q4.
• Corporate and other expenses down $2.8 million sequentially in Q4 due to non-recurrence of professional fees related to growth initiatives.
• Focus on safety, cost control, execution for customers, and offering differentiated efficiency-enhancing and highly engineered products/services.
• Progress on international expansion plans, with focus on establishing international business in a disciplined manner and dedicating resources to international revenue diversification.

Pressure Control Segment

• Q4 revenues: $177 million, down 4.5% sequentially.
• Operating income decreased $1.7 million or 3.3% sequentially, operating margins increased 40 basis points due to non-recurrence of miscellaneous charges in Q3, offset by lower operating leverage.
• Adjusted segment EBITDA decreased to $0.5 million or 0.8% sequentially, margins increased by 130 basis points.

Spoolable Technology Segment

• Q4 revenues: $96 million, down 11.2% sequentially due to lower customer activity in the back half of the seasonally slow quarter.
• Operating income decreased $7.4 million or 22.4% sequentially, operating margins decreased 380 basis points due to higher input costs and reduced operating leverage.
• Adjusted segment EBITDA decreased by $7.3 million or 17.1% sequentially, margins decreased by 260 basis points.

Revenue contribution: Pressure control segment contributed approximately 65.1% ($177M / $272M) of total Q4 revenue; spoolable technology segment contributed approximately 35.3% ($96M / $272M).

• First-quarter Pressure Control segment: revenue expected to be flat to up vs Q4's $177M; adjusted EBITDA margins 33%-35% (excludes ~$3M stock-based comp).
• First-quarter Spoolable Technology segment: revenue expected to be down mid to high single digits vs Q4; EBITDA margins ~35%-37% (excludes $1M stock-based comp).
• 2025 CapEx expectations: $45 million to $55 million, including ramp up of Vietnam production facility and international supply chain diversification efforts.
• Board approved quarterly dividend of $0.13 per share, to be paid in March.

• Trade policy uncertainty affecting the US oil and gas industry.
• Customer consolidations presenting risks.
• Tariff adjustments impacting cost profile, with additional tariffs on goods from Chinese facility expected to impact the entire US industry as tariffs apply to all steel and derivatives regardless of origin.

Q: How are you thinking about the activity outlook in the US market and能否outgrow underlying activity?

A: Confident in outperforming US activity levels as continuing to add new customers and encouraged by renewed activity in natural gas regions despite trade policy uncertainty.

Q: Margin headwind between Bossier City facility and China?

A: Bossier City facility costs at least 35% higher than Far East supply chain; US steel prices and Bossier costs expected to increase with tariffs.

Q: Status of Flexsteel's H2S solutions product?

A: Commercialized, first shipment expected in March or April to a US customer, with bigger addressable market in the Middle East.

Q: Evolution of spool bowls share in the US and international growth potential?

A: Pleased with positioning, expanding portfolio, and seeing ramp up from January to February; international awards lumpier but working on expanding, with real progress made on international growth.