Cactus's Q1 2025 Earnings Call: Unraveling Contradictions in Customer Behavior, Tariff Strategies, and Production Costs

Customer behavior and tariff mitigation, Vietnam production and tariff mitigation, manufacturing strategy and tariff mitigation, production cost and margin expectations, and customer behavior and market dynamics are the key contradictions discussed in Cactus's latest 2025Q1 earnings call.



Strong First Quarter Performance:
- Cactus reported revenue of $280 million for Q1 2025, up 3% sequentially, with adjusted EBITDA of $94 million and a margin of 33.5%.
- The growth was driven by record levels of Pressure Control product revenues per rig and record first-quarter bookings in the Spoolable Technologies business.

Pressure Control Segment Dynamics:
- The Pressure Control segment saw revenue of $190 million, up 7.7% sequentially, despite a 20 basis points decrease in operating margins and a 80 basis points decline in adjusted segment EBITDA margins.
- This was primarily due to reserves taken in connection with litigation claims.

Spoolable Technologies Segment Trends:
- Spoolable Technologies segment revenue was $93 million, down 3.6% sequentially, partially due to lower domestic customer activity in the seasonally slow quarter.
- International shipments partially offset this decline, with increased sales to Canada, marking the strongest quarter since acquiring the business.

Tariff Impact and Mitigation Strategies:
- Cactus is addressing increased tariffs by ramping up production in Vietnam, which is anticipated to neutralize tariff impacts by mid-next year.
- The company aims to source more alternatives from Vietnam, with expectations that Vietnam will provide the same tariff position as China previously, potentially providing an advantage over competitors.

Near-term Market Outlook and Demand:
- Cactus anticipates Pressure Control revenue to be down low to mid-single digits in Q2 2025, reflecting moderating levels of products sold per rig and a decline in average drilling activity.
- Revenue in Spoolable Technologies is expected to be up mid- to high single digits, supported by seasonal expansion and increased international sales.