Q2 2024 Cactus Inc Earnings Call

Good day and thank you for standing by.

Operator: Cactus Quarter 2, 2024, earnings call. At this time, all participants are in a listen-only mode. At the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, one-one, or your telephone. You will then hear an automated message advising your hand is raised. So if you draw your question, please press star, one-one again. We suggest that you please limit yourself to one question and one follow-up question.

Operator: This quarter to 2024 earnings call. At this time, all participants are in a listen-only mode.

Welcome to the Cactus Quarter 2 2024 Earnings Call.

Speaker Change: At this time, all participants are in the listen-only mode.

After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, 1-1, or your telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star 11 again.

We suggest that you please limit yourself to one question and one follow-up question.

Operator: Please be advised that today's conference is being recorded.

Alan Boyd: I would now like to hand the conference over to your first speaker today, Alan Boyd, Director of Corporate Development and Investor Relations. Please go ahead.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Boyd, Director of Corporate Development and Investor Relations. Please go ahead.

Alan Boyd: Thank you and good morning. We appreciate you joining us on today's call. Our speakers will be Scott Bender, our Chairman and Chief Executive Officer, and Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President; Stephen Bender, Chief Operating Officer; Steve Padlock, CEO of FlexSteel; and Will Marsh, our General Counsel.

Alan Boyd: Thank you, and good morning. We appreciate you joining us on today's call.

Speaker Change: Our speakers will be Scott Bender, our Chairman and Chief Executive Officer, and Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President, Steven Bender, Chief Operating Officer, Steve Tadlock, CEO of Flexdeal, and Will Marsh, our General Counsel.

Alan Boyd: Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties – many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release in the risk factors discussed in our filings with the SEC.

Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act.

Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations.

Unnamed Speaker: These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements. In addition, during today's call, we will reference certain non-GAAP financial measures.

Speaker Change: We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC.

Alan Boyd: Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements.

Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements.

Alan Boyd: In addition, during today's call, we will represent certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release.

In addition, during today's call, we will reference certain non-GAAP financial measures.

Reconciliations of these non- GAAP measures to the most directly comparable GAAP measures are included in our earnings release.

Scott Bender: With that, I'll turn the call over to Scott. Thanks, Alan, and good morning to everyone. I pleased to report that revenues and margins in both of our segments improved, despite year-to-date declines in our industry's North American land activity. I'm very proud of our associates, continued commitment to customer execution that's led to this consistent record of outperformance. Some second-quartered total company highlights include revenue of $290 million, just to the Vidal of $104 million, just to the Vidal margin of 35.7%. We increased our cash balance to $247 million, and yesterday we announced that our board approved an 8% increase in the quarterly dividend to $0.13 cents per share.

Speaker Change: With that, I'll turn the call over to Scott. Thanks, Alan, and good morning to everyone.

Scott: I'm pleased to report that revenues and margins in both of our segments improved despite year-to-date declines in our industry's North American land activity.

Scott: Some second quarter total company highlights.

Scott: Revenue of $290 million.

adjusted EBITDA of $104 million, adjusted EBITDA margin of 35.7%.

Scott Bender: Before we move into the financial review, I'd like to take this opportunity to formally introduce the newest member of our leadership. Team J-NUT, J joined us as Chief Financial Officer in June, and is immediately brought value in the helpful perspective to our company given as an extensive global financial leadership experience. We're delighted to have him. I'd also like to thank Gal Kiefer for his outstanding service as interim CFO these past few months.

Jay Nutt: Team Jay Nutt. Jay joined us as Chief Financial Officer in June and has immediately brought value and helpful perspective to our company given his extensive global financial leadership experience.

Scott Bender: We're delighted to have him. I'd also like to thank Al Keefer for his outstanding service as Interim CFO these past few months. I'll now turn the call over to Jay, who will review our financial results. Following his remarks, I'll provide some thoughts on our outlook for the near term before opening the lines for Q&A.

Jay Nutt: I'll now turn the call over to Jay, who will review our financial results. Following his remarks, I provide some thoughts on our outlook for the near term before opening the lines for Q&A. So, Jay, thank you for your kind words, Scott.

Speaker Change: I'll now turn the call over to Jay, who will review our financial results. Following his remarks, I'll provide some thoughts on our outlook for the near term before opening the lines for Q&A. So, Jay?

Jay: Thank you for your kind words, Scott. I'm privileged to have the opportunity to join an industry leader such as Cactus. I appreciate the confidence that the leadership team has placed in me, and I look forward to helping guide the company's continued growth while sustaining industry-leading returns. The operating and adjusted EBITDA margin improvements were due to higher operating leverage on the increased volume. For our spoolable technology segment, revenues were up 4.7% sequentially due largely to the resilience of international shipments and higher domestic customer activity. The adjusted EBITDA margin for the second quarter was 35.7% compared to 34.8% for the first quarter.

Jay Nutt: I'm privileged to have the opportunity to join an industry leader, such as Cactus. I appreciate the confidence that the leadership team has placed in me, and I look forward to helping guide the company's continued growth while sustaining industry-leading returns. As Scott mentioned, we had a solid quarter, resulting in total Q2 revenues of $290 million and total adjusted EBITDA of $104 million. For our pressure control segment, revenues of $187 million were up 6.9% sequentially, driven primarily by shipments of production equipment to a large customer who would not previously use Cactus, combined with customer efficiency improvements, leading to increased product sold per rigs followed.

Jay Nutt: Driven primarily by shipments of production equipment to a large customer who had not previously used cactus.

Jay: Combined with customer efficiency improvements leading to increased products sold per rigs followed.

Jay Nutt: Operating income increased $4 million or $7.7% sequentially, with operating margins increasing 20 basis points. Adjusted segment EBITDA increased $4.7 million or $7.7% sequentially, with margins increasing by 30 basis points. The operating and adjusted EBITDA margin improvements were due to higher operating leverage on the increased volume. For our schoolable technology segment, revenues were up 4.7% sequentially due largely to the resilience of international shipments and higher domestic customer activity. Operating income increased $13.6 million sequentially, primarily due to a smaller expense resulting from the re-measurement of the Flex Steel earnout liability. Adjusted segment EBITDA increased $3.7 million or 9.4% sequentially, while margins increased by 170 basis points, resulting from favorable operating leverage and lower input cost.

Jay Nutt: Operating income increased $4 million, or 7.7% sequentially, with operating margins increasing 20 basis points.

Jay Nutt: The operating and adjusted EBITDA margin improvements were due to higher operating leverage on the increased volume.

Jay Nutt: For our spoolable technology segment, revenues were up 4.7% sequentially due largely to the resilience of international shipments and higher domestic customer activity.

Speaker Change: Adjusted segment EBITDA increased $3.7 million, or 9.4% sequentially, while margins increased by 170 basis points, resulting from favorable operating leverage and lower input cost.

Jay Nutt: Corporate and other expenses were $5.9 million, up $400,000 sequentially, on higher stock-based compensation. On a total company basis, second quarter adjusted EBITDA was $104 million, up 8.7% from the first quarter. Adjusted EBITDA margin for the second quarter was 35.7%, compared to 34.8% for the first quarter. Adjustments to total company EBITDA during the second quarter of 2024 included non-cash charges of $5.9 million in stock-based compensation, and a $2.9 million charge related to the final re-measurement of the Flex Steel earnout liability. Depreciation and amortization expense for the second quarter was $15 million, which includes $4 million of amortization expense related to the intangible assets booked as part of the Flex Steel acquisition.

Speaker Change: Adjustments to total company EBITDA during the second quarter of 2024 included non-cash charges of $5.9 million in stock-based compensation and a $2.9 million charge related to the final re-measurement of the flex deal earn-out liability.

Jay Nutt: During the second quarter, the public or Class A ownership of the company averaged 83% and ended the quarter at 84%. Gap net income was $63 million in the quarter versus $50 million during the first quarter. The increase was driven by the stronger operational performance on the higher revenue achieved, combined with the smaller quarterly change in the re-measurement of the Earnout liability. Book income tax expense during the second quarter was $18 million, resulting in an effective tax rate of 22%. Adjusted net income in earnings per share were $65 million and 81 cents per share, respectively, compared to $60 million and $75 per share in the first quarter.

Jay: During the second quarter, the public or Class A ownership of the company averaged 83% and ended the quarter at 84%. Gap net income was $63 million in the quarter versus $50 million during the first quarter. The increase was driven by the stronger operational performance on the higher revenue achieved, combined with a smaller quarterly change in the remeasurement of the earn-out liability. Book income tax expense during the second quarter was $18 million, resulting in an effective tax rate of 22%.

Jay: Adjusted net income and earnings per share were $65 million and $0.81 per share, respectively, compared to $60 million and $0.75 per share in the first quarter. Additionally, we made early cash TRA payments and associated distributions of $18.2 million. Net capex was approximately $7 million during the second quarter. Some other considerations when looking ahead to the third quarter include an effective tax rate similar to the second quarter rate of 22%, and we estimate that the tax rate for adjusted EPS will continue to be approximately 26%.

Jay Nutt: Adjusted net income for the second quarter was net of a tax rate of 26%, applied to our adjusted pre-tax income. During the quarter, we paid a dividend of $0.12 per share, resulting in a cash outflow of approximately $10 million, including related distributions to members. Additionally, we made early cash TRA payments and associated distributions of $18.2 million. We elected to make this early payment of the majority of our 2023 TRA liability to minimize the interest expense on the liability, and we expect to pay the remaining balance in the third quarter on completion of our tax filings.

Jay Nutt: Due to our strong operating earnings and discipline working capital management during the quarter, we increased our cash and cash equivalence balance by $52 million. That was standing the aforementioned payments, and we closed the quarter with a cash balance of $247 million. NetCapX was approximately $7 million during the second quarter.

Speaker Change: Due to our strong operating earnings and disciplined working capital management during the quarter, we increased our cash and cash equivalents balance by $52 million, notwithstanding the aforementioned payments, and we closed the quarter with a cash balance of $247 million.

Speaker Change: Net capex was approximately $7 million during the second quarter.

Jay Nutt: In a moment, Scott will give you the operational outlook. Some other considerations when looking ahead to the third quarter include an effective tax rate similar to the second quarter rate of 22%, and we estimate that the tax rate for adjusted EPS will continue to be approximately 26%. Total depreciation and amortization expense during the third quarter is expected to be approximately $15 million, with $7 million associated with our pressure control segment and $8 million associated with spoolable technologies.

Jay Nutt: We are reducing our full year 2024 NetCapX outlook to be in the range of $35 million to $45 million due to the timing of our international expansion efforts. As noted, the remeasurement period for the Flex still earn-out payment is now complete, and the final payment of $37 million is expected to be distributed in the third quarter.

Jay: We are reducing our full year 2024 net capex outlook to be in the range of $35 million to $45 million due to the timing of our international expansion effort. As noted, the remeasurement period for the flex deal earn out payment is now complete, and the final payment of $37 million is expected to be distributed in the third quarter. That covers the financial review and outlook, and I'll now turn the call back over to Scott.

Speaker Change: We are reducing our full year 2024 Net Cap Ex Outlook to be in the range of $35 million to $45 million due to the timing of our international expansion efforts.

Speaker Change: As noted, the remeasurement period for the flex steel earn-out payment is now complete, and the final payment of $37 million is expected to be distributed in the third quarter.

Jay Nutt: Finally, the board has approved an 8% increase in the quarterly dividend to 13 cents per share, which will be paid in September.

Speaker Change: Finally, the Board has approved an 8% increase in the quarterly dividend to $0.13 per share, which will be paid in September .

Scott Bender: That covers the financial review and outlook, and I'll turn the call back over to Scott. Thanks, Jay. I'll touch on our operational expectations for the third quarter by reporting segments. Based upon preliminary revenue for July, we expect pressure control revenue to moderate mid-single digits versus the second quarter due to the combination of lower average U.S. land drilling activity and less visibility into production equipment shipments. From speaking with our customers, we believe that most of us are kind in U.S. land drilling activity levels is now behind us. Although the potential for further rig reductions remains as operators continue to pursue and complete consolidating transactions.

Speaker Change: Thanks, Jay. I'll now touch on our operational expectations for the third quarter reporting segment.

Speaker Change: From speaking with our customers, we believe that most of the decline in U.S. land drilling activity levels is now behind us, although the potential for further rig reductions remains as operators continue to pursue and complete consolidating transactions.

Scott Bender: We may see some offset to the consolidation activity via expected drilling efficiency increases of the newly combined business. Ajustity Vidal Martins in our pressure control segment are expected to be essentially flat at 33 to 35 percent for the third quarter, as cost efficiencies are offset in part by increased ocean-fraid costs. This adjusted evidog guidance excludes approximately 3 million of stock-based comp expense within the segment. I'm pleased to announce that the first shipments of our next generation wallhead system have now arrived at our US branches and are presently being staged for customer shipments. This roll-up will enhance our manufacturing cost, profile in the common quarters, while adding features for our customers and maintaining self-safetural status as the industry leading wallhead system.

Speaker Change: who may see some offset to the consolidation activity via expected growing efficiency increases of the newly combined businesses.

Speaker Change: I'm pleased to announce that the first shipments of our next generation wallhead system have now arrived at our U.S. branches and are presently being staged for customer shipments.

Scott Bender: shipment. This rollout will enhance our manufacturing cost profile in the coming quarters while adding features for our customers and maintaining self-safe drill status as the industry leading wellhead system. Regarding our explorable technology segment, we expect third-quarter revenue to be flat to slightly down from the second quarter, and this guidance reflects our expectations of a stable North American business that continues to outperform year-to-date activity reductions combined with lower international shipments due to the timing of deliveries achieved in a strong second quarter.

Speaker Change: shipment. This rollout will enhance our manufacturing cost profile in the coming quarters while adding features for our customers and maintaining self-safe drill status as the industry-leading wellhead system.

Scott Bender: Regarding our schoolable technology segment, we expect third quarter revenue to be flat to slightly down from the second quarter, and this guidance reflects our expectations of a stable North American business that continues to outperform year-to-date activity reductions combined with lower international shipments due to the timing of deliveries achieved in a strong second quarter. We expect the adjusted evidog margins in the segment to be approximately 39 to 41 percent for the third quarter, which excludes a million of stock-based comp in the segment. As a result of operating discipline by our team, input costs were lower than expected in the second quarter, and we're beginning to realize the benefits of using the cactus supply chain to source certain components of our flex deal product.

Speaker Change: Regarding our school technology segment, we expect third quarter revenue to be flat to slightly down from the second quarter. This guidance

Speaker Change: reflects our expectations of a stable North American business that continues to outperform year-to-date activity reductions combined with lower international shipments due to the timing of deliveries.

Scott Bender: We expect adjusted EVADOM margins in this segment to be approximately 39% to 41% for the third quarter, which excludes a million of stock-based comp in the segment. As a result of operating discipline by our team, input costs were lower than expected in the second quarter, and we're beginning to realize the benefits of using the Cactus supply chain to source certain components of our FlexFuel products. We will remain focused and responsible stewards of capital and are allocating capital and investing in the business with a focus on long-term value generation while rewarding shareholders, as reflected in our decision to raise the dividend by 8%.

Speaker Change: We expect adjusted EBITDA margins in this segment to be approximately 39 to 41 percent.

Scott Bender: Regarding our international expansion plans, pressure control product qualifications is progressing well, better the slower pace than we anticipated. We still expect to achieve product qualifications in 2024, remain focused on establishing a mid-east business, and are dedicating significant resources to these efforts in both segments. We will continue to take a disciplined approach to evaluating strategic opportunities. Adjusted corporate dot, corporate evidog is expected to be a charge of approximately 4 million in the third quarter, which excludes around 1.5 million of stock-based comp. Our main very pleased with the market positioning of cactus are portfolio of high margin, high return products and services, and the commitment of our organization to exceed customer expectations on eager to responsibly roll out our latest generation wallhead system to customers and to enable them to achieve reduced drilling times while enhancing safety and reliability.

Speaker Change: regarding our international expansion plans, pressure control product qualifications.

Speaker Change: is progressing well, but at a slower pace than we anticipated.

Speaker Change: We still expect to achieve product qualification in 2024, remain focused on establishing a Mideast business, and are dedicating significant resources to these efforts in both segments.

Speaker Change: We will continue to take a disciplined approach to evaluating strategic opportunities.

Speaker Change: Adjusted corporate EBITDA is expected to be a charge of approximately $1,000.00.

Speaker Change: 4 million in the third quarter, which excludes around 1.5 million of stock-based comp.

Speaker Change: I remain very pleased with the market positioning of Cactus, our portfolio of high-margin, high-return products and services, and the commitment of our organization to exceed customer expectations.

Scott Bender: In addition, we'll complete prototype testing of our new frat valve design, which should significantly reduce maintenance costs. As we prepare to make the final earnout payment to the sellers of Flex Deal, I am reporting on the value that we've generated for our stakeholders by incorporating that business into Cactus. Over the last 12 months, our spoolable technology segment has generated $164 million of adjusted evidog, which equates to a multiple of approximately 4 times the total consideration pay. of the business, including the upcoming final or not payment. I continue to believe, guy continue to believe that we are still in the early phases of growth for that segment.

Speaker Change: In addition, we'll complete prototype testing of our new frac valve design, which should significantly reduce maintenance costs.

Speaker Change: Over the last 12 months, our spoolable technology segment has generated $164 million of adjusted EBITDA, which equates to a multiple of approximately four times the total consideration paid for the business.

Speaker Change: including the upcoming final earn out payment. I continue to believe that we are still in the early phases of the process.

Scott Bender: We will remain focused in responsible stewards of capital and are allocating capital and investing in the business with a focus on long-term value generation while we're awarding shareholders, as reflected in our decision to raise the dividend by 8%.

Scott Bender: In summary, our primary objectives for the next 18 months include meaningful supply chain contribution from our mean non-section 301 manufacturing facility to enhance the cost and risk profile of our supply chain, increase deliveries of our next generation wallhead system, introduction of our next generation fractal, continued customer addition, additions and increases with our existing customer base for our schoolable business, supported by the introduction of new products and services, and international expansion about segments.

Scott Bender: In summary, our primary objectives for the next 18 months include... Meaningful supply chain contribution from our new non-Section 301 manufacturing facility to enhance the cost and risk profile of our supply chain, increased deliveries of our next generation wall head system, introduction of our next generation frac valve, continued customer additions and increases within our existing customer base for our spoolable business, supported by the introduction of new products and services, and international expansion in both segments. And so with that, I'll turn it over to the operator so that we may begin with Q&A. Operator? Thank you.

Speaker Change: In summary, our primary objectives for the next 18 months include

Speaker Change: Meaningful supply chain contribution from our new non-Section 301 manufacturing facility.

Speaker Change: to enhance the cost and risk profile of our supply chain, increased deliveries of our next generation wall head system, introduction of our next generation frac valve.

Speaker Change: Continued customer additions and increases within our existing customer base for our spoolable business, supported by the introduction of new products and services, and international expansion in both segments.

Operator: With that, I'll turn it over to the operator so that we may begin with Q&A. Operator. Thank you. At the time, we will conduct the question in an answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please remember that we suggest you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster.

Speaker Change: And so with that, I'll turn it over to the operator so that we may begin with Q&A. Operator?

Operator: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please remember that we suggest you please limit yourself to one question and one follow-up question. Our first line, our first question, I'm sorry, comes from the line between Luke Lemoine and Pike Sandler. Your line is now open.

Speaker Change: Thank you.

Speaker Change: At this time, we will conduct the question and answer session.

Speaker Change: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Luke Lemoine: Our first question of fire comes from the line of Luke Lemoy with Pike Sandler. Your line is now open. Good morning. Thank you. Scott, you noted the international momentum in spools. Want to see if you could explain on that a little bit. Also in spools, if you could just talk about what tracks you are getting with some of the larger diameter stuff as far as gathering and take away lines, that would be helpful as well. All right. Very good.

Speaker Change: Our first line, our first question, sorry, comes from the line of Luke Lemoine with Pike Sandler. Your line is now open.

Luke Lemoine: Yeah. Hi. Good morning.

Luke Lemoine: Scott, you noted the international momentum for spoolables. I wanted to see if you could expand on that a little bit. And then also, for spoolables, if you could just talk about how you know what traction you're getting with some of the larger diameter stuff as far as gathering and takeaway lines are concerned, that would be helpful as well.

Scott Bender: Alright, very good. I'm going to let, if you don't mind, Mr. Tadlock respond to that. Yeah, sure.

Scott Bender: All right.

Stephen Tadlock: I'm going to lie if you don't mind, Mr. Cadlock. Respond to that?

Stephen Tadlock: Yeah, sure. Sure, Luke. On the international efforts, we've added key personnel. We're very focused on growth in this area. I think, historically, while Pike still had more of an international presence and Cactus, actually, it really wasn't an area of focus, and it was sort of if the order came, they would certainly take it, but it wasn't something they were really going out and trying to grow. So we're changing that philosophy, seeing a lot of increased quoting activity as a result. We're adding installation equipment to facilitate the growth as well, so we feel like we're just scratching the surface on international.

Stephen Tadlock: Sure. In terms of international efforts, we've added key personnel who are very focused on growth in this area. I think historically, while Flex Steel had more of an international presence than Cactus actually, it really wasn't an area of focus, and it was sort of if the order came, they would certainly take it, but it wasn't something they were really going out and trying to grow. So we're changing that philosophy, and we're seeing a lot of increased quoting activity as a result.

Speaker Change: Sure. Thank you, Luke.

Speaker Change: Alan Tadlock, Alan Boyd, Scott Bender, Alan Tadlock, Alan Boyd, Alan Tadlock, Alan Boyd,

Speaker Change: It was sort of, if the order came, they would certainly take it, but it wasn't something they were really...

Speaker Change: going out and trying to grow. So we're changing that philosophy, seeing a lot of increased quoting activity as a result. We're adding installation equipment to facilitate the growth as well. So we feel like we're just scratching the surface on international.

Stephen Tadlock: We're adding installation equipment to facilitate the growth as well. So we feel like we're just scratching the surface on international markets. I think on larger diameter, we are definitely seeing more interest in our larger diameter skews as people recognize the benefits of the rapid installation and enhanced corrosion resistance. And so I think that's progressing nicely, both in the midstream area and also some E&P operators that are sort of changing the way they do their takeaway and gathering.

Stephen Tadlock: I think on the larger diameter, we are definitely seeing more interest in our larger diameter skews as people recognize the benefits of the rapid installation and enhanced corrosion resistance, and so I think that's progressing nicely. Both in the mystery area but also even some E&B operators that are sort of changing the way they do their takeaway and gathering.

Speaker Change: I think on the larger diameter, we are definitely...

Speaker Change: seeing more interest in our larger diameter SKUs as people recognize the benefits.

Speaker Change: of the Rapid Installation and Enhanced Corrosion Resistance. And so I think that's progressing nicely, both in the midstream area, but also even some E&P operators that are sort of changing the way they do their takeaway and gathering.

Luke Lemoine: Okay, and then just follow up, Scott. I always appreciate your kind market outlook in the US.

Scott Bender: Okay, and then just haul up Scott. I always appreciate kind of your market outlook in the U.S. And I mean, you did note that you think most of the work talent is behind us. You know, could you just expand maybe upon the back half of the year? Do you see it pretty flatish, you know, also living around this level? And any kind of indication, maybe for the start of 25 that you see right now? Yeah, I know you all have good memories. So last time I told you that, contrary to maybe some of the published reports at the time, I saw the U.S.

Speaker Change: OK, and then just follow up, Scott.

Scott: Always appreciate kind of your market outlook in the U.S. and I mean you did note that you think most of the recount is behind us.

Scott Bender: And I mean, you did note that you think most of the recount is behind us. You know, could you just expand maybe on the back half of the ear? Do you see it pretty flattish, you know, oscillating around this level? And any kind of indication for the start of 25 that you see right now?

Speaker Change: Yeah, I know you all have good memories.

Speaker Change: So, last time I told you that, contrary to maybe,

Scott Bender: land rich out in the 550 to 575 range. I think, Alan, we bottomed at 560 and it rebounded slightly to 568. You know, I absolutely feel like the worst is behind us, but we are scaling our business based upon the 550 range. Do I think we're going to go below 550? No. Do I? Am I seeing indications from customers that we're going to go below 550? The answer is no as well, but I still very concerned about and you all should be about natural gas prices. And I'm probably a little less concerned in 24 because I'm getting ready to answer your not 2025 question.

Scott Bender: You know, I... It hasn't been meaningful.

Speaker Change: You know, I...

Speaker Change: But we are scaling our business.

Speaker Change: Based upon

Speaker Change: The 550 range. Do I think we're going to go below 550? No.

Scott: Am I seeing indications from customers that we're going to go below $5.50? The answer is no as well, but I'm still very concerned about, and you all should be, about natural gas prices.

Speaker Change: I'm probably a little less concerned in 24, because I'm getting ready to answer your 20-25 question. I'm a little less concerned about

Scott Bender: I'm a little less concerned about the reduction and overall recount following consolidation. I think we've really only seen evidence of that in one case, and it hasn't been meaningful. So I do think that we're going to get better natural gas support in 2025. But offsetting that, I think we're going to see more effect from consolidation efforts.

Speaker Change: The reduction in overall recount following consolidation. I think we've really only seen evidence of that in one case, and it hasn't been meaningful.

Scott Bender: So, I do think... And, offsetting that, I think we're going to see more effects from consolidation efforts. Now, I need to add something about consolidation, because from our perspective, it's not all bad. And, you know, we've always used that as a proxy because it's easy: per rig per month goes up. Hence the comment I made about efficiency. So sometimes people see efficiency, and they say, well, they're going to be able to drill fewer wells.

Scott Bender: Now I need to add something about consolidation because, from our perspective, it's not all bad news. So if you see, I'm giving you a long way to answer. I'm sorry. If you see, if you're concerned about recounts and you know, we've always used that approach as a proxy because it's easy. We've seen shipments of well-hat equipment per week, per month go up. Hence, the common I made about efficiency. So sometimes people see efficiencies, and they say, well, they're going to be able to drill as well. That's not what I meant. What we do is we measure every month the number of housings we ship against the number of rigs serviced, and we've seen a very meaningful increase.

Speaker Change: So if you see the... I'm giving you a long-winded answer. I'm sorry.

Speaker Change: We've seen shipments of wellhead equipment.

Speaker Change: Hence the comment I made about efficiency. So sometimes people see efficiencies and they say, well, they're going to be able to drill less wells. That's not what I meant. What we do is we measure every month the number of housings we ship.

Scott Bender: That's not what I meant. What we do is we measure every month the number of housings we ship against the number of rigs we service, and we've seen a very meaningful increase. I think a better proxy for our business is Wells Drilled than our rig count. And, Just further, I've said before that long-term consolidation is probably a friend. On the one hand, on the other hand, you know that customers with larger recounts have much more leverage in terms of pricing. So I think it's probably too early, but,

Speaker Change: against the number of rigs we service, and we've seen a, you know, a very meaningful increase. I think a better proxy for our business is Wells Drilled than our rig count.

Scott Bender: I think a better proxy for our business is well drilled than our recount. Just further, I've said before that long-term consolidation is probably a friend. On the one hand, on the other hand, you know that customers with larger recounts have much more leverage in terms of pricing.

Speaker Change: Just further, I've said before that long-term consolidation is probably a friend.

Scott Bender: So I think it's probably too early, but next quarter, I think I'll have a much better idea. We're just now beginning to hold our customers about their plans for 2025. So if you stand by, I'd rather give you correct information than merely speculation. Okay, no perfect.

Speaker Change: Next quarter, I think I'll have a much better idea. We're just now beginning to poll our customers about their plans for 2025.

Luke Lemoine: Definitely appreciate all the detail, and I'll turn it back. Thank you.

Operator: One more for our next question.

David Anderson: Our next question comes from the line of David Anderson with Barclays. Your line is now open. Thanks. Hey, good morning. Hey, Scott.

David Anderson: Our next question comes from the line of David Anderson with Barclays. Your line is not open. Hey Scott, so while I do over that sort of complicated North American outlook, you just provided there. Maybe I can follow up a little bit.

David Anderson: So while I stew over that sort of complicated North American outlook you just provided, maybe I can follow up a little bit on what Luke's question was on the international side. I'm also kind of curious about the spoolable international business. How are you kind of driving that? Are you bundling that with your other kind of pressure control?

Speaker Change: sort of complicated North American outlook you just provided there.

David Anderson: I want to lose question was on the international side. I'm also kind of curious about the School of International Business. How are you kind of driving that? Are you bundling that with your other kind of with pressure control? Are you going to stay marked? Is it kind of curious about the strategy of building up at international business? And, kind of secondarily, do you have like a target for us of kind of how much of your business you think will be international state? I don't be end of 25. I know you have the stuff coming on Saturday.

Speaker Change: Maybe I can follow up a little bit on what Luke's question was on the international side. I'm also kind of curious about the spoolable international business. How are you kind of driving that? Are you bundling that with your other...

David Anderson: Are you going to the same markets? Just kind of curious about the strategy of building up that international business and, kind of secondarily, do you have a target for us of kind of how much of your business you think will be international, say, I don't know, the end of 25? I know you have this stuff coming up on Saudi. I think that's more of a 26 month time frame, but just sort of in your mind, how does international grow as a portion of your business over the next few years? Just kind of bigger.

Speaker Change: with the pressure control. Are you going to the same markets? Just kind of curious about the strategy of building up that international business and kind of

Speaker Change: Secondarily, do you have like a target for us of kind of how much of your business you think will be international, say, I don't know, the end of 25? I know you have this stuff coming on in Saudi, I think that's more of a 26...

David Anderson: I think it's more of a 26 timeframe, but just sort of in your mind. How does international grow as a portion of your business over the next few years? Just kind of bigger picture. Thanks.

Scott Bender: Are we talking to David? We talk. I assume we're talking about school. I was originally talking about school, but I'm kind of bringing to the old to broader kind of your overall international efforts overall. So I'm curious how school will fit in, but then bigger picture. How international overall fit as over the next few years. From what you can tell. Okay.

David Anderson: Are we, are we talking, David? Are we talking? I assume we're talking about spools.

David Anderson: Well, I was originally talking about school, but I'm kind of bringing in your overall international efforts overall. So I'm curious how school fits in, but then bigger picture, kind of how does international overall fit over the next few years from what you can tell?

Mark: I assume we're talking about spools.

Scott Bender: Okay, Steve. You want to talk about Spool of Wolves?

Stephen Tadlock: Steve, you want to talk about school. Yeah. And I think there was a question in there. Are we bundling? We're not really bundling, but we do have some resources that are shared internationally that are in the region. And they have both experience and well had some of them more experience and well had and some more experience and schoolable. So they work together. And yeah, obviously you have channel partners in certain areas over there as well. So they they hit up the same ones. In terms of schoolable growth, I think we we had had a presence in terms of or we've had sales continuing with one large customer who probably gets in the Middle East.

Stephen Tadlock: Yeah, and I think there was a question there, are we bundling? We're not really bundling, but we do have some resources that are shared internationally that are in the region, and they have both experience in wellhead, some of them more experience in wellhead, and some more experience in spoolable. So they work together, and obviously, you have channel partners in certain areas over there as well, so they hit up the same ones.

Speaker Change: in the region, and they have both experience in wellhead, some of them more experience in wellhead, and some more experience in spoolable. So they work together, and obviously you have channel partners in certain areas over there as well. So they hit up the same ones.

Stephen Tadlock: In terms of spoolable growth, I think...

Mark: We had had a presence in terms of, or we've had sales continuing with one large customer who you could probably guess in the Middle East.

Stephen Tadlock: But we feel like we can make further inroads with that customer just by being more responsive, frankly, and dedicating more resources and equipment there. And similar similar in other areas like Latin America and even over in Australia where we have a well had operation. We're looking to grow in that area as well. So I think it's a holistic approach to how we're trying to grow Schoolable and we're trying to leverage any benefit that we have from the cactus relationships that we're also bringing in new people and using the existing reach. As far as how big it could be, I mean, we really, on the spoolable side, there's a lot of potential for growth.

Mark: So I think it's a holistic approach to how we're trying to grow spoolable and we're trying to leverage any benefit that we have from the cactus relationships, but we're also bringing in new people and using the existing resources.

Mark: As far as how big it could be, I mean, we really, on the spoolable side, there's a lot of potential for growth. There are a lot of large projects, consistent projects, so, you know, I don't see why it couldn't be.

Stephen Tadlock: There are a lot of large projects, consistent projects. So, you know, I don't see why it couldn't be similar to North America at some point. It's just going to take time to get there.

Mark: similar to North America at some point. It's just, it's going to take time to get there. Yeah, I mean, you know, and let me just expand upon that because we just had a board meeting and

Scott Bender: Yeah, I mean, let me just expand upon that because we just had a board meeting. And you won't surprise you. Now, when I tell you our board has the same question, and I told them that it's my expectation, it remains my expectation that in the next few years, we'll have to expand capacity. Because there are a lot of international, there's a lot of international activity. And when it comes to international, I think as much as we stand apart in the US, I think we stand apart even more internationally because of a larger diameter and higher pressures.

Stephen Tadlock: You won't be surprised. Now when I tell you our board asked the same question, and I told them that, uh... It's my expectation and it remains my expectation that, in the next few years, we will have to expand capacity because... There were a lot of international... There's a lot of international activity, and... When it comes to international, I think as much as we stand apart in the U.S., I think we stand apart even more internationally because of the larger diameter and higher pressure. So, uh... You know, I frankly, I think so.

Speaker Change: You won't surprise you when I tell you our board asked the same question. And I told them that...

Mark: It's my expectation, it remains my expectation, that in the next few years we'll have to expand capacity because

Mark: There are a lot of international, there's a lot of international activity.

Scott Bender: So, you know, frankly, I think I told you this when we bought spools that I felt like the runway was even greater. And I still feel the runway is even greater. Notwithstanding our efforts from the well outside internationally. So, your question about what do I see in terms of international for the next, did you say 25? Next couple, you know, just kind of the next couple, your 25, 26 or 30, so how much is this grow just a bigger picture? I'm going to tell you right now, my objective is 40% of our revenue. Okay. Interesting.

Mark: So...

Speaker Change: You know, frankly, I think...

Speaker Change: I think I told you this when we bought spoolables, that I felt like the runway was even greater and I still feel that the runway is even greater, notwithstanding our efforts from the wellhead side internationally. So your question about...

Scott Bender: What do I see in terms of international for the next, did you say 25? Yeah, just the next couple, yeah, just kind of the next couple of years, 25, 26, just sort of curious though. How much has this grown? Just a bigger picture. I'm going to tell you right now, my objective is 40.

Speaker Change: What do I see in terms of international?

Speaker Change: for the raps.

Speaker Change: I'm going to tell you right now, my objective is 40% of our revenue.

Speaker Change: Wow. Okay.

David Anderson: My, my follow-up question is completely different; changes subject here. If there is a day, realize when we say one question, one follow-up, determine me one question with six parts, one follow-up. Anyway, go ahead. If you want me to go back, you can be happy to go back to the queue if you like. But this is a good question. All right.

Speaker Change: Interesting.

Mark: My follow-up question is a completely different change of subject here. Hey Dave, realize when we say one question, one follow-up.

David Anderson: Interesting. I mean, one question with six parts and one follow-up, at least. Anyway, go ahead. Do you want me to go back into the queue? I'm happy to go back into the queue if you like, but it's a good question. No, I'm just, I don't know. All right. My question is, all right, so the U.S. administration, there's a change in the U.S. administration, you know, it seems like we would likely see increased tariffs on Chinese goods once again. Can you just refresh us a little bit?

Scott Bender: My question is the US administration. Is it changing your administration? You know, it seems like we would see likely increased tariffs on Chinese goods once again. Just, can you just refresh us a little bit? You have a lot of your, your manufacturing out of China. I know it impacts some of that in terms of costs. Is there anything you would do differently this time around if this happened again? Do you ramp up the US manufacturing? Are there other levers you can pull? Or is it really not that much of a big deal because your competitors are facing the same thing?

Speaker Change: My question is, the U.S. administration, the changing U.S. administration, you know, it seems like we would see likely increased tariffs on Chinese goods once again.

David Anderson: You have a lot of your manufacturing out of China. I know it impacts some of that in terms of cost. Is there anything you would do differently this time around if this happened again?

Mark: [inaudible]

Speaker Change: Can you just refresh us a little bit, you have a lot of your manufacturing out of China, I know it impacts some of that in terms of cost, is there anything you would do differently this time around if this happened again? Do you ramp up US manufacturing? Are there other levers you can pull? Or is it really not that much of a big deal because your competitors are facing the same thing? So it's all kind of a push in terms of cost?

Scott Bender: So it's all kind of a push in terms of costs. Yeah, I would say the latter. So that for, for example, I think I may, may have mentioned that the plant that that we're finishing right now. And should begin to ship in the fourth quarter. It's capable of taking care of our international business. Although we, we intend to manufacture both of these. So we built a plant with that in mind. In terms of increased tariffs, you know, I think worst case scenario, I don't want to get, I don't want to make political comments, but likely scenario is maybe, I would not know if it's likely, one scenario is there's a 10% duty on top of everything, which certainly won't hurt us anymore than it hurts our competitors.

Speaker Change: Yeah, I would say the latter, so that, for example,

Scott Bender: Do you ramp up US manufacturing? Are there other levers you can pull? Or is it really not that much of a big deal because your competitors are facing the same thing? So it's all kind of a push in terms of pushing.

Speaker Change: I think I may have mentioned that the plant that we're finishing right now and should begin to ship in the fourth quarter is capable of taking care of our international business.

Mark: Although we intend to manufacture in both locations.

Mark: So, we built a plant with that in mind. In terms of increased tariffs,

Speaker Change: You know, I think worst case scenario, I don't want to get, I don't want to make political comments, but likely scenario is maybe, I don't know if it's likely, one scenario is that there's a 10% duty on top of everything.

Mark: which

Mark: Certainly,

Scott Bender: Because frankly, we make more of what we sell in the U.S. than any of our competitors make in the U.S. And we're more capable of making product in the U.S. So I'm not, you know, look, I don't like for costs to go up, but I'm not nearly as bothered when it affects our competitors at the same extent. So worst case scenario is I'm sure you all heard that one of the candidates claimed that tariffs were going to go to 60%. I think that we are much, much better position to deal with a 60% tariff on Chinese product than anybody else.

Mark: So, I'm not, you know, look, I don't like for costs to go up, but I'm not nearly as bothered when it affects our competitors to the same extent.

Mark: So, worst case scenario is, I'm sure you all heard that one of the candidates claimed that

Speaker Change: Terrace, we're going to go to 60%.

Mark: I think that we are in a much, much better position to deal with a 60%

Mark: Tarif on Chinese product than anybody else.

Scott Bender: Let's hope it doesn't get there.

David Anderson: Thanks, Scott. Appreciate. Thank you.

Mark: Let's hope it doesn't get there. Thanks a lot, Scott. Appreciate it.

Scott Bender: Yeah, I would say the latter. Okay.

Operator: One moment for our next question, please.

Scott Bender: So, for example, I think I may have mentioned that the plant that we're finishing right now and should begin to ship in the fourth quarter is capable of taking care of our international business, although we intend to manufacture in both locations. So, we built the plant with that in mind, in terms of increased tariffs.

Speaker Change: Thank you. One moment for our next question, please.

Jeff Gruber: Our next question comes from a line of Jeff; we block with TPH.

Scott Bender: You know, I think the worst-case scenario, I don't want to get into, I don't want to make political comments, but the likely scenario is maybe, I don't know if it's likely, one scenario is that there's a 10% duty on top of everything, which won't hurt us any more than it hurts our competitors. Because, you know, Frankly, we make more of what we sell in the US than any of our competitors make in the US.

Scott Bender: And we're more capable of making products in the US. So I'm not, you know, look, I don't like for costs to go up, but I'm not nearly as bothered when it affects our competitors to the same extent. So the worst case scenario is, I'm sure you all heard that one of the candidates claimed that tariffs were going to go to 60%. I think that we are in a much, much better position to deal with the 60%... tariff on Chinese products than anybody else.

Speaker Change: Our next question comes from the line of Jeff LeBlanc with TPH. Your line is now open.

Jeff Gruber: Your line is now open. Thanks, Scott and team. Thank you for taking my question. For my first question, I wanted to see if you could expand upon the drawing efficiencies you previously referenced, particularly given a more holistic view on the market and the fact that operators typically include lateral lengths when they talk about efficiency gain. So, any way you can quantify the magnitude? I know you qualitatively referenced it before. Thank you. I can quantify it to the extent that we track it. Alan, I think over the, was it over the quarter or over that year, it's up about 10%.

Jeff LeBlanc: Good morning, Scott and team. Thank you for taking my question.

Jeff LeBlanc: For my first question, I wanted to see if you could expand upon the drilling efficiencies you previously referenced.

Jeff LeBlanc: particularly given they have a more holistic view on the market and the fact that operators typically include lateral lengths when they talk about efficiency gain so any way you can quantify the magnitude. I know you qualitatively referenced it before. Thank you.

Speaker Change: I can quantify it to the extent that we track it.

Jeff LeBlanc: Alan, I think over the, was it over the quarter or over the year, it's up about 10 percent.

Scott Bender: Yeah, quarter or quarter, it was around 10% for us, but that metric is pretty lumpy, you know. But, you know, what we do is we look at the number of well heads we ship versus the number of rigs we serve. And we compare that quarter to quarter to measure efficiencies. So that's why I said the better proxy is well. I know that everybody believes these longer laterals. And, you know, that certainly is the case; it takes longer than the drill, the longer lateral. But I can't argue with the stats. The stats showed a 10% increase in well head shipment against the same number of rigs.

Alan: Yeah, quarter over quarter it was around 10% for us, but that metric is pretty lumpy, you know.

Alan: But, you know, what we do is we look at the number of wellheads we ship versus the number of rigs we serve, and we compare that quarter to quarter to measure it.

Jeff LeBlanc: efficiencies.

Jeff LeBlanc: So that's why I said the better proxy is Wells.

Jeff LeBlanc: I know that everybody believes these longer laterals, and that certainly is the case. It takes longer to drill a longer lateral. But I can't argue with the stats. The stats showed a 10% increase in wellhead shipments.

Jeff LeBlanc: and Scott Bender.

Scott Bender: So it's just a fact.

Mark: against the head member of Briggs.

Jeff LeBlanc: So it's just it's just a fact

David Anderson: Let's hope it doesn't get there. Thanks a lot, Scott. I appreciate it.

Jeff Gruber: Well, thanks for that color.

Operator: And I'll turn that call back over the operator. Thank you. Thank you so much.

Speaker Change: Well, thanks for that, Keller, and I'll turn the call back over to the operator. Thank you. Okay. Thank you.

Jayaram Arun: We'll move on to the next question.

Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Jeff LeBlanc with TPH. Your line is now open.

Speaker Change: Thank you so much.

Jayaram Arun: Our next question comes from a lot of area. Jayaram with JP Morgan Securities, LLC.

Speaker Change: for our next question.

Speaker Change: Our next question comes from the line of Erin.

Scott Bender: Your line is not open. Yeah, good morning. I'm doing well. I'm intrigued about, you know, one of the drivers of the 2QB Pete was a significant order from a large customer who's new to Cactus. I wonder if he could give us some more details on that. And thoughts on, you know, how this relationship is, is, is going in the other follow on opportunities here. Do I have any competitors that are going to have access? Maybe. So the answer has got to be no. I can't tell you this except to tell you that, that it's a customer that has historically been a cactus customer for a while ahead, but has not historically been a production tree customer.

Erin JRL: JRL with JP Morgan Securities LLC. Your line is now open.

Erin JRL: Yeah, good morning. I'm doing well. I'm doing well.

Erin JRL: I'm intrigued about, you know, one of the drivers of the 2Q Beat was a significant order from a large customer who's new to Cactus. I was wondering if you could give us some more details on that and thoughts on, you know, how this relationship is.

Speaker Change: is going and other follow-on opportunities here.

Speaker Change: Do I have any competitors that are going to have access to this? Maybe.

Speaker Change: So the answer has got to be...

Speaker Change: No, I can't tell you this, except to tell you that it's a customer that has historically been a cactus customer for wall heads, but has not historically been a production tree customer.

Joel Bender: We internally feel like customers are now becoming more discriminating when it comes to production. And they work over the last several years. So I think it's a question of, I mean, they like the fact that we build our own doubts. And they like the fact that we control the delivery of those valves, not just the quality. So I think that Joel will join me in saying that we're more optimistic about growth in our production segment than we've been in some time. Yeah, we've seen a lot more activity, a lot more inquiries for the product. I think a lot of our bigger customers become much more risk of worse.

Speaker Change: We internally

Speaker Change: feel like customers are now becoming more discriminating when it comes to production of the new work over the last several years.

Speaker Change: So I think it's a question of...

Speaker Change: I mean they like the fact that we build our own valves.

Speaker Change: and they like the fact that we control the delivery of those valves.

Speaker Change: not just the quality.

Jayaram Arun: So they're looking for an API monogram product with aftermarket service. Great, great.

Jayaram Arun: And just, you know, maybe a follow. One of the things we're thinking about as we think about, you know, 2025 and thinking about kind of the margin profile of Cactus, you have a new manufacturing facility, which I think is going to be low cost. And then you'll have a new frack valve as well as the new generation well head product. And if we remain in and called a lackluster environment in North America, you know, not a huge column on shale volumes as we sit here today, how do you think about how margins could, you know, behave in this kind of environment with some of the self-help in new product introductions.

Speaker Change: Not a huge call on shale volumes as we sit here today. How do you think about how margins could behave in this kind of environment with some of the self-help and new product introductions?

Scott Bender: Yeah, I feel very optimistic. But, but I wanted to say this to you, and I've said it before. So we are going to roll out particularly the well head product in a responsible. Manor, which means that we need to turn our existing inventory before we open up the tap. So I think that, you know, Joel feels like it'll be, it's not that the product's not ready because the product is ready and if we could, if we needed, if we needed to ship it tomorrow we could, but we don't want to, we don't want to create. We have, through our careers, Joel's career and my career, we have always been very, very sensitive to obsolescence.

Speaker Change: Yeah, I feel very optimistic.

Speaker Change: but but I want to say this to you and I've said it before

Speaker Change: So, um...

Speaker Change: We are going to roll out

Speaker Change: particularly the Wellhead product in a responsible manner.

Speaker Change: which means that...

Speaker Change: We need to turn our existing inventory.

Speaker Change: before we open up the tap. So I think that, you know, Joel feels like it'll be, it's not that the product's not ready, because the product is ready. And if we needed to ship it tomorrow, we could.

Speaker Change: but we don't want to create...

Speaker Change: We have, through our careers, Joel's career and my career, we have always been

Speaker Change: very, very sensitive talk.

Scott Bender: So we have a great product in our that we don't impact financially, art returns. So you're going to have to, you're going to have to bear with us in trust that we're going to introduce it in a responsible fashion. But the short answer is, I think that, that even in anemic, you know, 2025, that our margins are going to hold up very well. Great. Thanks for that color.

Speaker Change: obsolescence.

Speaker Change: So we have a great product in our existing product. This is a better product, but...

Speaker Change: We want to make sure that we don't impact financially our returns. So, you're going to have to...

Speaker Change: you're going to have to bear with us and trust that we're going to introduce it in a responsible fashion. But the short answer is I think that

Speaker Change: even in an anemic 2025.

Speaker Change: at our margins are going to hold up very well.

Scott Bender: All right. Thank you so much.

Speaker Change: Great, thanks for that color.

Scott Gruber: We'll move on for our next question, please. Our next question comes from the line of Scott Gruber with Citigroup. Your line is now open.

Speaker Change: Thank you so much. One moment for our next question please.

Jeff LeBlanc: Thanks, Scott and Thirucherai. Thank you for taking my question. For my first question, I wanted to see if you could expand upon the drawing efficiencies you previously referenced, particularly given that you have a more holistic view of the market and the fact that operators typically include lateral lengths when they talk about efficiency gains, so any way you can quantify the magnitude, although I know you qualitatively referenced it before. Thank you.

Alan Boyd: Alan, I think over the, was it over the quarter or over the year, it's up about 10%.

Speaker Change: Our next question comes from the line of Scott Gruber with Citigroup. Your line is now open.

Scott Gruber: Hey, Scott. Good morning. Morning. One of, you know, come back to the question on, you know, picking up the production sheet, production tree share, you know, with the large customer in the US. I guess my question is, you know, when you look at the dozen or so large E and P's and majors, which are, obviously, increasingly dominating the industry, you have strong share and well heads. Can you give us a sense for kind of what percentage of that cohort, you know, does the production tree share not match the share on the well head side? So let me just see if, let me, let me clarify your question.

Speaker Change: Thanks, Scott. Yes, good morning. Morning. I want to, you know, come back.

Scott Gruber: I have a question on picking up the production tree share with a large customer in the U.S. I guess my question is, when you look at the dozen or so large EMPs and majors that are obviously increasingly dominating the industry,

Scott Bender: So that's why I said the better proxy is wealth. I know that everybody believes in longer laterals, and, you know, that certainly is the case. It takes longer to drill the longer lateral. But I can't argue with the stats. The stats showed a 10% increase in wellhead shipments. So it's just a fact.

Speaker Change: You have strong share in wellheads. Can you give us a sense for kind of what percentage of that cohort, you know, does the production tree share not match the share on the wellhead side?

Operator: Well, thanks for that, Keller, and I'll turn the call back over to the operator. Thank you.

Operator: for our next question. Our next question comes from the line of Erwin. JRO with JP Morgan Securities, LLC. Your line is now open.

Speaker Change: So let me just see if, let me clarify your question. You're asking me, theoretically, if our market share for wellheads with these customers is

Scott Bender: You're asking me, theoretically, if our market share for well heads with these customers is, I'm going to, and, you know, we don't report market share except that if you were in the room, I'd patch on the end and tell you not to worry about it. But let's say that that number was 40%. You're asking what our market share is for production bells as comparison, as compared to that. Yeah, I'm wondering the delta between those two numbers and how much of an uplift you could get if the share is aligned. There is a pretty significant disparity between our market share for production bells.

Speaker Change: And, you know, we don't report market share, except that if you were in the room, I'd pat you on the head and tell you not to worry about it. But let's say that that number was...

Speaker Change: 40%. You're asking what our market share is for production valves as comparison as compared to that?

Speaker Change: Yeah, I wonder if it's Delta.

Speaker Change: in between those two numbers and how much of an uplift you could get if the shares aligned.

Speaker Change: Amen.

Speaker Change: There is a pretty significant disparity between our market share for production balance.

Scott Bender: And so, you know, I'm looking at Joel and looking at Steven.

Speaker Change: and so

Scott Bender: We've never really measured it, but I would be surprised if our market share production bells is half. And then, just theoretically, if a customer is using you for wealth ads, but not for production trees, and then they start using you at the same, you know, sharing their workloads for production trees. And once the approximate revenue opportunity doesn't match the low-height side, any sense of scale. Now, I wouldn't say it matches the well-height. It's probably I'm thinking the average production tree and 40% of a well-height. That's a good scale. You know, it ain't chicken feet. Yeah, that sounds like a good opportunity.

Speaker Change: You know, I'm looking at Joel and looking at Stephen. We've never really measured it, but I would be surprised if our market share for production valves is half.

Speaker Change: Agreed.

Speaker Change: Gotcha. And then, yeah, just theoretically, if a customer is using you for wellheads, but not for production trees, and then they

Speaker Change: start using you at the same, you know, share of their workload for production trees. What's the approximate revenue opportunity? Does it match the low-head side?

Speaker Change: Any sense of scale?

Speaker Change: Now, I wouldn't say it matches the wellhead.

Speaker Change: It's probably, I'm thinking the average production tree and

Speaker Change: Forty percent of a wellhead.

Speaker Change: Thank you. Cheers. Cheers. Cheers. Cheers.

Erwin JRO: Yeah, good morning. I'm doing well. I'm doing well.

Speaker Change: We're here.

Scott Gruber: Okay. I'll keep it going. One and one follow up. Okay, that's it. You know, hey, by the way, you know, you can always call me. Thanks. Appreciate it. Thank you so much for that. All right.

Speaker Change: That sounds like a good opportunity. Okay, I'll keep it. Thank you. One-on-one follow-up. Okay, thanks.

Speaker Change: You know, hey by the way, you know you can always call me.

Speaker Change: [inaudible]

Speaker Change: Thanks, appreciate it.

Speaker Change: All right, thank you so much for that.

Erwin JRO: Do I have any competitors that are going to have access?

Operator: I'm showing no further questions at this time.

Scott Bender: So the answer has got to be... No. I can't tell you this except to tell you that.

Scott Bender: I feel like customers are now becoming more discriminating when it comes to production, the new work over the last several years. I mean, they like the fact that we build our own value, not just quality. So, I think that Joel would join me in saying that we're more optimistic about growth in our production segment than we've been in some time.

Joel: Yeah, I...

Scott Bender: I would now like to turn it back to Scott Bender for closing remarks. Okay. Thank you all for participating. I think that we have 10 times more people than we had last time. I guess, Patterson. Look, I think 2025, for us, is an exciting time. Despite the fact that we don't, we're not planning for any sort of explosive growth. But you know how unpredictable this business is. Here's what I can tell you. Our costs will be lower. Our productivity will be higher. And our focus is extremely, I think, laser sharp. And that's why I summarized my remarks with.

Scott Bender: But I want to say this to you, and I've said it before. We need to turn our assisting in the... And if we needed to ship it tomorrow, we could. We have, through our careers, Joel's career and my career, we have always been very, very sensitive to, So you're going to have to, even in an anemic 2025, our margins are going to hold up very well.

Speaker Change: Alright, I'm showing no further questions at this time. I would now like to turn it back to Scott Bender for closing remarks.

Scott Bender: Okay thank you all for participating I think that we have

Scott Gruber: Our next question comes from the line of Scott Gruber with Citigroup. Your line is now open.

Scott Gruber: You have a strong share in wellheads. Can you give us a sense for kind of what percentage of that cohort? Does the production tree share not match the share on the wellhead side?

Scott Bender: So let me just see if, let me clarify your question. You're asking me, theoretically, if our market share for wellheads with these customers is

Scott Gruber: Yeah, I'm wondering if it's Delta.

Scott Bender: There is a pretty significant disparity between our market share for production. And so...

Scott Bender: 10 times more people than we had last time, with I guess Patterson.

Scott Bender: It's probably, I'm thinking, the average production tree.

Scott Gruber: That sounds like a good opportunity. Okay. I'll keep it to one and one follow up. Okay. You know, hey, by the way.

Scott Gruber: You know, hey, by the way, you know, you can always call [inaudible].

Scott Gruber: Thanks; I appreciate it.

Operator: Alright, I'm showing no further questions at this time. I would now like to turn it back to Scott Bender for closing remarks.

Scott Bender: 10 times more people than we had last time, I guess Patterson.

Speaker Change: Look, I think 2025 for us is an exciting time, despite the fact that we're not planning for any sort of explosive growth, but you know how unpredictable this business is. Here's what I can tell you.

Scott Bender: Our costs will be lower.

Scott Bender: our productivity will be higher and

Scott Bender: Look, I think 2025 for us is an exciting time, despite the fact that we're not planning for any sort of explosive growth. But you know how unpredictable this business is. Here's what I can tell: our productivity will be higher. And our focus is extremely, I think laser sharp. And that's why I summarized my remarks with, I want you to know what our objectives are for this year. And everybody in this organization knows what our objectives are. So they're, they're clear. And we are, we remain, you know, the largest shareholders, and you can be sure that we're going to do what's best for our shareholders and for the family.

Scott Bender: I think laser sharp and that's why I summarized my remarks with I want you to know what our objectives are for this year.

Scott Bender: I want you to know what our objectives are for this year. And everybody in this organization knows what our objectives are. So they're, they're clear. And we are, we remain, you know, the largest shareholders. And you can be sure that we're going to do what's best for our, sure, our shareholders and for the family.

Scott Bender: and everybody in this organization knows what our objectives are, so they're clear. And we are, we remain, you know, the largest shareholders.

Scott Bender: you can be sure that we're going to do what's best for our shareholders and for the family. And I'll leave it at that, but thank you for your continued support.

Scott Bender: And I'll leave it at that. But thank you for your continued support. Have a good day.

Operator: Thank you for your participation in today's conference. This thus concludes the program. You may now disconnect. Thank you.

Scott Bender: Have a good day.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Speaker Change: Thanks for watching!