Cactus Q2 2025 Earnings Report

Cactus EPS Results

• Actual EPS: $0.66
• Consensus EPS: $0.67
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.81

Cactus Revenue Results

• Actual Revenue: $273.58 million
• Expected Revenue: $280.28 million
• Beat/Miss: Missed by -$6.70 million
• YoY Revenue Growth: -5.80%

Cactus Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 10:00AM ET

Cactus (NYSE:WHD), together with its subsidiaries, designs, manufactures, sells, and leases pressure control and spoolable pipes in the United States, Australia, Canada, the Middle East, and internationally. It operates through two segments, Pressure Control and Spoolable Technologies. The Pressure Control segment designs, manufactures, sells, and rents a range of wellhead and pressure control equipment under the Cactus Wellhead brand name through service centers. Its products are sold and rented primarily for onshore unconventional oil and gas wells for drilling, completion, and production phases of the wells. This segment also provides field services to install, maintain, and handle the equipment. The Spoolable Technologies segment designs, manufactures, and sells spoolable pipes and associated end fittings under the FlexSteel brand name. Its products are primarily used to transport oil, gas, and other liquids. This segment also provides field services and rental items through service centers and pipe yards, as well as offers equipment and services internationally. In addition, the company offers repair and refurbishment services. Cactus, Inc. was founded in 2011 and is headquartered in Houston, Texas.

Cactus Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 financial performance included revenue of $274 million, adjusted EBITDA of $87 million with a 31.7% margin, a cash balance rising to $405 million, strong free cash flow, and an 8% dividend increase to $0.14 per share.
• Negative Sentiment: The Pressure Control segment faced margin compression due to an unexpected doubling of Section 232 tariffs on steel imports, resulting in higher costs and a shift to more expensive supply chains.
• Positive Sentiment: The Spoolable Technologies segment outperformed expectations with 3.9% sequential revenue growth to $96 million and a 13.2% increase in adjusted EBITDA, driven by improved manufacturing efficiencies.
• Positive Sentiment: The company announced a transformative plan to acquire a majority interest in Baker Hughes’ surface pressure control business, diversifying its geographic footprint and targeting closing by late 2025 or early 2026.
• Neutral Sentiment: Q3 guidance projects mid-to-high single-digit revenue declines in both segments, stable Pressure Control margins of 28%–30%, Spoolable Technologies margins of 35%–37%, and a reduced full-year CapEx range of $40–$45 million.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Cactus Q2 twenty twenty five Earnings Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. 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, Director of Corporate Development & Investor Relations at Cactus]

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 Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President Stephen Bender, Chief Operating Officer Steve Tadlock, CEO of Flexsteel and Will Marsh, our General Counsel. 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.

[Alan Boyd, Director of Corporate Development & Investor Relations at Cactus]

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 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.

[Alan Boyd, Director of Corporate Development & Investor Relations at Cactus]

Reconciliations of these non GAAP measures to the most directly comparable GAAP measures are included in our earnings release. With that, I'll turn the call over to Scott.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Thanks, Alan, and good morning to everyone. We generated substantial free cash flow during the second quarter despite the efficiencies caused by tariffs and commodity market weakness. We also announced a transformative acquisition of a controlling interest in Baker Hughes surface pressure control business. Our spoolable technologies business outperformed profit expectations in the quarter and our pressure control product sales remained strong relative to declining activity levels. I'd like to thank our Cactus associates for another quarter in which we remain focused on safety and execution for our customers despite the challenging business climate.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Some second quarter total company financial highlights include revenue of $274,000,000 adjusted EBITDA of $87,000,000 adjusted EBITDA margins of 31.7%. We increased our cash balance to $4.00 $5,000,000 And yesterday, we announced that our Board approved an 8% increase in our quarterly dividend to $0.14 per share. I'll now turn the call over to Jay Nutt, our CFO, who will review our financial results. And following his remarks, I'll provide some thoughts on our outlook for the near term before opening the lines for Q and A. So Jay?

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

Thank you, Scott. As Scott just mentioned, total Q2 revenues were $274,000,000 a sequential 2.4% decline, and total adjusted EBITDA was $87,000,000 down 7.6% sequentially. For our Pressure Control segment, revenues of $180,000,000 were down 5.5% sequentially, driven primarily by lower revenue in our rental business, where pricing often weakens disproportionately when overall demand softens. As we've demonstrated in the past, we will continue to selectively deploy rental equipment when returns meet our threshold. A less favorable product mix compared to the first quarter resulted in slightly lower product revenues in the period, though our product sales decreased less than the decline in the average U.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

S. Land rig count, a testament to our strong market position. Operating income declined $12,000,000 or 22.1% sequentially, with operating margins compressing five ten basis points and adjusted segment EBITDA was $11,700,000 or 18% lower sequentially, with margins decreasing by four fifty basis points. The operating margin decline was primarily due to the lower operating leverage, higher product costs due to tariffs, which particularly impacted our results in June and the lower revenue contribution from our higher margin rental business. In addition, we recorded $5,100,000 of legal expenses and reserves in connection with litigation claims, which represented an increase of approximately $2,000,000 from the first quarter.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

For our Spoolable Technologies segment, revenues of $96,000,000 were up 3.9% sequentially on higher domestic customer activity in the seasonally stronger second quarter. Operating income increased $4,200,000 or 17.5% sequentially, with operating margins expanding three forty basis points due to the improved operating leverage and increased manufacturing efficiencies following our investments in the same. Adjusted segment EBITDA increased $4,400,000 or 13.2 percent sequentially, while margins expanded by three twenty basis points. Corporate and other expenses were flat sequentially at $9,600,000 in Q2, which included a $3,500,000 of professional fees associated with the announced plan to acquire a majority interest in the surface pressure control business of Baker Hughes. Adjusted corporate EBITDA was flat at $4,400,000 of expense compared to Q1.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

On a total company basis, second quarter adjusted EBITDA was $87,000,000 down 7.6% from $94,000,000 in the first quarter. Adjusted EBITDA margin for the second quarter was 31.7% compared to 33.5% for the first quarter. Adjustments to total company EBITDA during the 2025 include non cash charges of $6,300,000 in stock based compensation, dollars 3,500,000.0 for transaction related professional fees and $177,000 for the initial phase of severance actions taken in June to rightsize the organization to reflect lower activity levels. A fuller picture of the actions taken to restructure the business will be evident in our results as we progress through the year. Depreciation and amortization expense for the second quarter was $16,000,000 which includes an ongoing $4,000,000 of amortization related to the intangible assets resulting from the Flexsteel acquisition.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

During the second quarter, the public or Class A ownership of the company averaged and ended the period at 86%. GAAP income was $49,000,000 in the second quarter versus $54,000,000 during the first quarter. The decrease was largely driven by lower operating income. Book tax expense during the second quarter was $14,000,000 resulting in an effective tax rate of 23%. Adjusted net income and earnings per share were $53,000,000 and $0.66 per share, respectively, during the second quarter compared to $59,000,000 and $0.73 per share in the first quarter.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

Adjusted net income for the second quarter was net of a 25% tax rate applied to our adjusted pretax income. During the quarter, we paid a quarterly dividend of $0.13 per share, resulting in a cash outflow of approximately $10,000,000 including related distributions to members. Positive movements in both inventory and accounts payable, combined with lower net CapEx, led to a much stronger quarter of free cash flow. We ended the quarter with a cash balance of $4.00 $5,000,000 a sequential increase of approximately 58,000,000 Net CapEx was approximately $11,100,000 during the 2025. In a moment, Scott will give you our third quarter operational outlook.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

Some additional financial considerations when looking ahead to the third quarter include an effective tax rate of 22 and an estimated tax rate for adjusted EPS of approximately 25%. Total depreciation and amortization expense during the third quarter is expected to be approximately $16,000,000 with $7,000,000 associated with our Pressure Control segment and $9,000,000 in Spoolable Technologies. We are reducing our full year 2025 CapEx outlook to be in a range of $40,000,000 to $45,000,000 including the $6,000,000 equity investment made into Vietnam in the first quarter. We are continuing to evaluate our capital spending program, considering the trend of domestic activity, while maintaining investments to support Vietnam production growth and to strengthen manufacturing efficiencies in Baytown. Additionally, we expect to pay an annual TRA payment and distributions related to 2024 taxes late in the third quarter, which will be approximately $24,000,000 Finally, the Board has approved an 8% increase in the quarterly dividend of $0.14 per share, which will be paid in September.

[Jay Nutt, EVP, CFO & Treasurer at Cactus]

We're pleased that the durability of cash flows in our structurally capital light business has allowed us to consistently increase our dividend over the past several years. That covers the financial review, and I'll now turn the call back over to Scott.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Thanks, Jay. I'd like to take a few moments to discuss our latest understanding of the tariff impact on our business and the corresponding weaker than anticipated pressure control margin performance in the second quarter. On June 4, the Section two thirty two tariff rate on steel and certain steel derivatives was unexpectedly doubled from 25 to 50%. This resulted in an increase in the tariff rate applied to goods imported from our Chinese manufacturing facility from the minimum 45% incremental rate discussed on last quarter's call and reflected in our guidance affirmed on June 4 to what is now an incremental 70%. As a result of the general tariff uncertainty and this change, we broadened our supply chain to other higher cost jurisdictions, including The U.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

S, to ensure certainty of delivery for our customers. These higher cost materials turned through our inventory faster than we had anticipated, resulting in depressed margins as we exited the quarter. In light of recent announcements, we must now modify the statement we made last quarter regarding our expectations that sourcing from Vietnam going forward would put us back into the same tariff position we have been operating under for the past several years. Considering the recent doubling of the Section two thirty two tariffs, we now believe that the rate applied to most imports from Vietnam could remain at 50%, despite the recently published rate of 20%, an absolute increase of 25% over the Section three zero one rate that applied to our imports from China since 2018. This increased rate has not changed our planning to heavily utilize Vietnam for our U.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

S. Imports, given the challenges of scaling U. S. Manufacturing and the cost competitiveness of Vietnam. We continue to work with our vendors and our customers to neutralize the impact of these increased tariff base rates going forward.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I'll now touch on our expectations for the 2025 by reporting segment. During the third quarter, we expect pressure control revenue to be down mid to high single digits versus the $180,000,000 reported in the second quarter. The decline is primarily due to the anticipated decrease in the average rig count in the third quarter. Further deterioration in our frac rental business is also contributing to the decrease as we elect to sideline equipment rather than irresponsibly deploy into a shrinking market, where we believe current frac crew counts are more than 10% below second quarter average levels. Last Friday, the Baker Hughes U.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

S. Land rig count was five twenty six, 5% below the second quarter average level, and we anticipate that modest softening will continue into the fourth quarter. Our customers have recently suggested that the majority of the declines for 2025 are behind us, provided commodity prices remain near recent levels. Adjusted EBITDA margins in our Pressure Control segment are expected to stay relatively stable at 28% to 30% for the third quarter, despite lower operating leverage. This adjusted EBITDA guidance includes the partial benefits arising from our cost reduction and recovery efforts, offsetting increased average tariff costs and excludes approximately $3,000,000 of stock based compensation expense within the segment.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Considering the increasing pace of shipments from our Vietnam facility and the support of our customer base, we believe that the second and third quarters will represent the trough of our Pressure Control segment profit margin in this cycle, barring further changes in tariff rates or a greater than anticipated decline in industry activity levels. Regarding our Spillable Technologies segment, we expect third quarter revenue to be down high single digits from the second quarter as the progression of domestic activity levels impacts customer spending. That said, we remain pleased with recent international bookings. We expect adjusted EBITDA margins to be approximately 35% to 37% for Q3, which excludes $1,000,000 of stock based comp in the segment moderating from the second quarter levels on lower volume and relatively stable input costs. Adjusted corporate EBITDA is expected to be a charge of approximately $4,000,000 in Q3, which excludes $2,000,000 of stock based comp.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

We remain extremely excited about our recently announced plan to acquire a majority interest in the surface pressure control business of Baker Hughes, which we believe is continuing to perform well. The recent activity trends in North American markets combined with tariff impacts to our base business further demonstrate the strategic rationale for diversifying our footprint with a business heavily focused on the Mid East. Integration planning work is progressing well. We expect closing of the transaction in late twenty twenty five or early twenty twenty six as we work through administrative filings in select global jurisdictions. We look forward to welcoming SBC associates to Cactus in the near future.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

In conclusion, the second quarter was busy for our team as we announced a transformative acquisition and faced supply chain and tariff uncertainty. Despite these distractions, we maintained execution focus for our customers and generated solid free cash flow in the quarter. Our confidence in the cash flow durability of our structurally variable cost driven and capital light business is reflected in the Board's recent approval to increase our dividend by 8%. We believe the sharpest domestic activity declines for 2025 are behind us and look forward to beginning 2026 with a substantially broader geographic footprint and customer base from our announced acquisition plan. And with that, I'll turn it back over to the operator, and we can begin Q and A. Operator?

[Operator]

Thank you. At this time, we will conduct a question and answer session. Our first question comes from Steven Gengaro from Stifel. The floor is yours.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Hi, Steven. Thanks. Good morning, everybody. Think two things for me. Think first, you mentioned that it sounds like June was kind of felt the brunt of the tariffs, but you still guided pressure control margins pretty flat in the second quarter.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Can you just sort of maybe provide a little bit more color around how that's achieved sequentially? Because I'm just thinking June was probably worse than the average in the quarter you just reported.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

You would be correct. So I'd tell you, there really were a couple of factors. Stephen, the first one was this unexpected doubling of Section two thirty two, for which the administration gave absolutely no notice. So when we prepared our guide for June, we didn't anticipate that two thirty two was going to ratchet up by 25 absolute points. So that impacted both inbound goods from Vietnam and inbound goods from China.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

So that was clearly not anticipated. I think the second point is that we had, begun to look for alternate supply chain sources, and that was primarily in The US. And The US supply chain, as you know, is higher cost than our imported supply chain. We still believed it was below what the fully tariffed amount would have been. And I think the last was we had anticipated pushing through some cost recovery initiatives only to see, oil prices implode in April and May, which actually caused our customers to request price relief rather than entertain cost recovery requests.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

We had to put that on pause for a bit. So those are the three contributing factors.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Okay, thank you. And then the other question I had is sort of bigger picture. Like when we look at the world, I mean, prices are relatively high. I mean, I know the strips maybe a little lower than the spot price, but when you think about it, you talk to your customers about the next several quarters. What do you think they're looking for to lead to some confidence to ramp activity? Because I feel like the oil price backdrop is not that bad and the rig count just kind of keeps shrinking.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Yes, Stephen, I'm not really sure that our customers are as responsive today as they were five years ago more robust crude prices? Because you're entirely right. I think that that range of $65 to $70 is certainly providing very reasonable returns. But they're so focused right now on capital discipline and returning cash to shareholders that nobody wants to be the first to announce CapEx expansion. Having said that, it's undeniable that the gas market is expanding.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I think our gas rig count is up 50% since January, which is, of course, diametrically at odds with our oil rig count. So unfortunately for us, and maybe the rest of the industry, with some exceptions, gas still makes up a much lower percentage of our total rig count. So, I guess the short answer is yes, we're going to see some expansion with gas, but it's starting at a much lower base. And I don't think we're gonna see a significant response to oil prices.

[Stephen Gengaro, Managing Director at Stifel Financial Corp]

Great. No. Thank you for all the details.

[Operator]

Thank you for your question. One moment, please. Our next question comes from David Anderson of Barclays. The floor is yours.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Hey, David. Are you? Good morning.

[J. David Anderson, Managing Director at Barclays]

I'm doing great, Scott. How are things?

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Good.

[J. David Anderson, Managing Director at Barclays]

So your product lines in The US are leveraged across drilling, completions and production. It sounds like completions was the weakest for you this quarter as rentals were really kind of taking a hit. I was wondering, could you just kind of walk me through your views on the second half about how those three components are trending? I mean, we expect production to hold up stronger? Do you think completions might be a little bit stronger than drilling?

[J. David Anderson, Managing Director at Barclays]

You're indicating maybe the rig count declines are kind of behind us. Can you just walk me through kind of how those three things are kind of driving the second half? Thanks.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I probably expand on your, conclusion that it was completions or frac activity mostly impacted our results. But, I'd be remiss if I didn't mention that our production business was also beginning to soften, not as significantly as our frac related business. So then in answer to your question about the rest of the year, I think our team believes that completion activity or frac related activity is going to decline more significantly than drilling activity. So, as I mentioned, we're already, as of today, 12% below in terms of frac crews. Well, I said at least 10%, but the number is actually 12%, today below the frac crew count in the second quarter of this year.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

And, I really don't see that situation improving very much. Unfortunately, as frac activity wanes, so does the subsequent production activity, because if we don't frack a well, we can't put a production tree on Now I think we've got quite a few locations that may have been fracked and don't have production trees. So production activity, I don't think will suffer to the same degree as frac related activity.

[J. David Anderson, Managing Director at Barclays]

Alright. Let's shift to much more positive things. Middle East. Middle East acquisition, I'd really love to know a little bit about how now you've kind of been in here a little bit, and I'm curious how you're going to approach this. We've watched you grow with pressure control business in U.

[J. David Anderson, Managing Director at Barclays]

S. Land essentially from scratch to a dominant share position. Clearly, you've done a great job whipping school into shape. But this business in The Middle East is a different story. By all accounts, it's been essentially orphaned under prior owner.

[J. David Anderson, Managing Director at Barclays]

I was wondering if you could kind of walk us through about turning something like this around. Like, where do you start? What's the process on something like this? How are you sort of thinking about it right now? Really appreciate it. Thank you.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Wow, David. Sorry. Asked me to to maybe, offer my opinion about how Baker has run the company. So let me let me first say that Baker has done a significant job in improving the results of their international business over the last two years. So kudos to them.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

They made some very, very difficult decisions in terms of closing down the less productive manufacturing facilities. I'm looking at my general counsel here to make sure you're not kicking me, are you? So kudos to them. I think that, in general, we operate with a much flatter organization. I mean, that's undeniable.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

You can imagine we operate with a much flatter organization than any of our large competitors, and Baker's no exception, nor is, FMC or Schlumberger Cameron. So, you know, I think that, the culture is going to be significantly different. I think the next area of emphasis will clearly be on our supply chain philosophy, which, again, Baker's done a remarkable job in improving their cost structure for their products. But I still believe that we do a much better job, particularly in an environment that's not plagued with tariffs. So I think you could look for supply chain.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I think you could look for organization and cultural changes. Frankly, I'm excited about the opportunity to enhance that business. I also think you're going to see the same degree of focus that we've brought to The US market on the international market where that has not been the case.

[J. David Anderson, Managing Director at Barclays]

I would expect nothing less. Thank you very much, Scott.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Okay. Thank you.

[Operator]

Thank you for your question. Our next question comes from Ehren Jawaraman from JPMorgan Securities. The floor is yours.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Yes. Good morning. Good morning. Good morning, team. So is it fair to say when you guys came out with your early June kind of update to the market on pressure control margins in that 33%, 35% range that it didn't factor in maybe two things.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

One is the increase in Section two thirty two tariffs, as well as some of the legal costs that Jay mentioned in his opening remarks. Is that fair?

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

You know, mean, it is fair, but I'd say there's more than just that. There's the section two thirty two, which was significant, but there also is our cost recovery, efforts were paused because of the implosion in crude prices.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Got it. Got it. That makes sense. That makes sense. And maybe just as a follow-up, and I don't want to spend too much time on this, but maybe you could just talk a little bit about the legal the legal charge that you took.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

It looks like something in the queue around an ongoing situation with Cameron. Maybe you could just describe, provide an update on that and thoughts on, do you expect any more cost to put in the model as we think about the back half of the year?

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Well, what can I say on that?

[Executive]

Well, I think we can start by letting him know the trial was delayed. We'll have some further disclosure on that in the 10 Q. So a lot of those expenses were gearing up for trial, which was delayed at the last minute. So there will be some more expenses in the back half of the year, but it's just hard to predict how the litigation may go.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Okay. And just what is the nature of the dispute?

[Executive]

It's, as we disclosed in the

[Executive]

Q, it's an IP disclosure around the SafeLink or IP dispute around the SafeLink product.

[Arun Jayaram, Research Analyst at JP Morgan Chase & Co]

Okay. Got it. Got it. Thanks a lot, gentlemen.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Thank you.

[Operator]

Thank you for your question. Our next question comes from Scott Grubber of Citigroup. The floor is yours.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Hey,

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Yes. Morning, Doing well. Thanks for letting me in here. It's good to hear, Scott, that PC margin should be troughing. I think that means you expect maybe some improvement into '26 even in a soft drilling market. Is that fair?

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

So that's fair.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Okay, and some color on

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

We don't really give guidance that far out, but all things being equal, that's very fair.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

No, I know.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

But you can appreciate there's lot of missing pieces right And obviously, just see the margin. But if we just assume drilling is kind of flat with the normal seasonality across 4Q, 1Q. But can you just provide a little more details on what could drive kind of grind higher in the margins? Is it tariff surcharges being passed along? Is it Vietnam ramping up?

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Just some more color on what could drive some improvement.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

You're paying excellent attention. More expansive cost recovery, benefits. It is the migration to Vietnam. So even though Vietnam currently is 50% incremental, it's still below the absolute 95% coming out of China. That certainly is a tailwind for us.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I think it also has to do with, and we haven't disclosed the impact of that, but if you followed us from the very beginning, we're pretty aggressive in terms of rightsizing, and so you'll begin to see the benefits of that rightsizing as they flow through our P and L. So it'll be pretty significant.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Gotcha. If I could sneak one more in. When do you think JMAM is in a position to fully take on the former Chinese load?

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Yeah. We believe that that will be the coming summer.

[Scott Gruber, Director - Oilfield Services & Equipment Research at Citi]

Okay. Very good. I appreciate it. Thank you.

[Operator]

Thank you for your question. This concludes the question and answer session. I would now like to turn it back to Scott Bender, Chairman and CEO, for closing remarks.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

I thank you all first for joining us. It's been pretty active Q2, as you know, both in terms navigating this macro environment and the tariff environment, as well as, of course, the announcement of this Baker deal. I think if we've learned anything, and I hope you have as well, it's the importance of this international diversification. While international won't be immune to some of these, oil price, swings, it's going to be far more stable and certainly long term a much more resilient market than the domestic market. Although honestly, I am pretty optimistic about The US.

[Scott Bender, CEO & Chairman of the Board of Directors at Cactus]

Our market position is strong. Anyway, thank you very much. Everybody have a good day.

[Operator]

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

Participants

Executives

• Alan Boyd, Director of Corporate Development & Investor Relations
• Jay Nutt, EVP, CFO & Treasurer

Analysts

• Scott Bender, CEO & Chairman of the Board of Directors at Cactus
• Stephen Gengaro, Managing Director at Stifel Financial Corp
• J. David Anderson, Managing Director at Barclays
• Arun Jayaram, Research Analyst at JP Morgan Chase & Co
• Executive
• Scott Gruber, Director - Oilfield Services & Equipment Research at Citi